By law, when a debt is discharged in bankruptcy, the debtor is not required to pay the debt. Sometimes, however, the debtor may wish to pay the debt anyway, even though it has been legally discharged as a liability. For example, the debtor may want to keep a car that was the secured collateral for an auto loan. For that to happen, the debtor can enter into an agreement with the creditor to pay off the debt even though it has been discharged. This is called a reaffirmation agreement.

A reaffirmation agreement is voluntary and is not required by law. The written agreement between the debtor and the creditor is legally binding on both parties. The bankruptcy court has to approve the agreement. The reaffirmation agreement must comply with certain rules and, if the debtor is not represented by an attorney, there will be a hearing to determine whether the agreement satisfied those rules.

By law, the reaffirmation agreement must: (1) be voluntary; (2) cannot place an undue financial burden on the debtor or the debtor’s family; (3) has to be in the debtor’s best interest; and (4) can be terminated any time before the court orders the discharge of debtor’s debts or within 60 days after the reaffirmation agreement has been filed with the court, whichever is the longest amount of time.

The reaffirmation agreement is a new agreement between the debtor and the creditor that is not included in the bankruptcy proceeding. This means that if the debtor fails to pay the debt that is the subject of the reaffirmation agreement, it is not discharged in bankruptcy and the debtor owes the creditor under the terms of the agreement.

Reaffirming a debt is a very serious financial commitment. It is for this reason that the courts require a hearing when a debtor is not represented by an attorney. It is advisable, as with any bankruptcy situation, that a debtor consult with an attorney before agreeing to reaffirm a debt.

The Phoenix bankruptcy attorneys at Ariano & Reppucci, PLLC will be happy to assist you with filing a bankruptcy claim and with helping you decide whether it is in your best interests to reaffirm a debt. They will walk you through the process and will provide you with the necessary paperwork should you decide to pursue the reaffirmation. Call them today at (602) 515-0841.