How Does a Reaffirmation Agreement Work?

A reaffirmation agreement is one that can be signed when an individual is filing for bankruptcy. With this type of agreement, an individual is essentially reaffirming a debt and choosing not to include it in the bankruptcy discharge. Here are the basics of the reaffirmation agreement and how it works.

Reaffirmation Agreement

With this type of agreement, an individual chooses to enter into a contract with one of its creditors. The individual decides that they do not want to include this particular account in their overall bankruptcy proceedings. At that point, the account can be removed from the bankruptcy. The individual will continue to make payments to the creditor and the creditor will agree not to foreclose on the property that is securing the debt as long as payments are made.

Why Choose a Reaffirmation Agreement?

At first glance, it might seem strange to want to reaffirm a debt when you have the opportunity to get out of it. However, in some cases, individuals can benefit by using this type of agreement. Typically, this is used when an individual wants to save a particular piece of property instead of losing it during the bankruptcy proceedings. For example, you might sign one of these agreements with your mortgage lender in order to keep your house. You could also utilize this type of agreement in order to hang onto your car so that you can get back and forth to work. While it is not always necessary to sign a type of document in order to keep your possessions, some creditors will prefer to take this route.

Disallowing the Agreement

Even if you do decide that you would prefer to sign a reaffirmation agreement with a creditor, it may not always be up to you. The judge in your bankruptcy case has the right to disallow this contract from being processed. They will look at your individual situation and determine if you can afford to make the payments after the bankruptcy goes through. If your expenses are greater than your income, there is a good chance that they will not allow the reaffirmation agreement to be processed. They want to make sure that you do not get yourself into further trouble after bankruptcy goes through.


Using a reaffirmation agreement can be a good way to secure some of your important assets. However, this type of agreement comes with some risks. First of all, you will be on a tight leash when it comes to making your payments for the asset. If you missed one or two payments, the creditor could decide to foreclose on the property. At that point, you would be personally liable for the debt. They could come back and sue you for the debt even after foreclosing on the property. Another risk that you will have to deal with is that you cannot file for bankruptcy for another eight years after signing this type of agreement with your creditor.

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