Reaffirmation Agreements – What Are They?
Birmingham Bankruptcy Attorneys assisting bankrupt clients negotiate reaffirmation agreements in Houston, Dale, Barbour, Geneva, Pike, and surrounding counties in Alabama
Reaffirmation agreements are contracts between a creditor and a debtor in bankruptcy that reaffirm a dischargeable debt, thus allowing the creditor to continue to attempt to collect the reaffirmed debt after the discharge. Essentially, the debtor waives his right to discharge a certain debt, and promises to repay the creditor, although the debt would legally disappear absent the reaffirmation. Such agreements are of a strictly voluntary nature – a creditor cannot coerce a debtor into signing a reaffirmation, and any representation by the creditor to the contrary can mean serious legal trouble for the creditor. A debtor should be aware of this, and carefully consider his or her ability to make the promised payments before entering into such an often ill-advised agreement, because once the discharge is granted, it will be eight years before the debtor has another opportunity to get a discharge of his or her debts.
In certain situations, a reaffirmation agreement might be advisable. For example, suppose you got an auto loan some years ago, and have kept current on those payments despite falling behind on other debts. Most likely, you have built up a good amount of equity in the vehicle. However, under that auto loan agreement you signed, there might be a clause to the effect that a bankruptcy filing constitutes a default on the loan. This would mean that upon discharge and the lifting of the automatic stay, even though you never missed a payment, the lender could repossess the vehicle. A reaffirmation agreement can give the lender the extra assurance that you will continue to pay after the bankruptcy, while preventing you from having to give up the car of which you are close to owning free and clear.
In other situations, however, reaffirmation agreement is quite ill-advised. For example, most attorneys never advise that a debtor sign a reaffirmation agreement in regard to a home mortgage. The reason is that if you fall behind again on your mortgage payments, the bank can not only foreclose and sell your home, but also come after you individually for any deficiency resulting from the sale by filing a lawsuit against you. And after the discharge, you will not be eligible for bankruptcy protection for a period of eight years.
If a creditor is attempting to get you to sign a reaffirmation agreement, you need the counsel of an experienced bankruptcy attorney before deciding whether to do so. Creditors can be both persuasive and intimidating in talking you into signing these agreements, appealing to your emotions and failing to apprise you of the potentially devastating consequences. By signing an affirmation you are ceding the most important protection that the bankruptcy code offers: discharge of old debts. If you are considering such an agreement, or even if you have already signed one and are understandably having second thoughts, we can help. Contact the bankruptcy professionals at Parkman White, LLP right away. Email us or call our reaffirmation agreement attorneys at 334-792-1900 today for your consultation, and let us put our experience to work for you.