When individuals file for personal bankruptcy, they typically expect that their prior debts will be resolved through the bankruptcy process and no longer be a concern. However, it can come as a surprise to receive communication from lenders in the form of a document called a “reaffirmation agreement” after filing for bankruptcy protection.
What are “Reaffirmation Agreements”?
A reaffirmation agreement is a contract between the bankruptcy filer and the former creditor. Its purpose is to confirm that the filer agrees to repay the debt, even though it would otherwise be discharged through the bankruptcy filing. Reaffirming a debt means renewing the obligation to pay it according to specified terms.
Conditions for a Valid Reaffirmation Agreement:
To ensure the validity of a reaffirmation agreement, the Bankruptcy Code (Section 524(c) and (d)) outlines several essential conditions that must be satisfied, including:
Timing: The agreement must be entered into and filed with the court before the discharge is granted.
Notice of Rescission: The agreement must provide notice that the filer can rescind it at any time before the discharge is granted or within 60 days of filing the agreement with the court, whichever is later.
Attorney Declaration: If the filer is represented by an attorney, the attorney must sign a declaration stating that the filer’s consent is informed, voluntary, and does not impose undue hardship on the filer or their dependents.
Court Approval: If the attorney does not sign a declaration (in certain circumstances) or if the filer is not represented by an attorney, the agreement must receive court approval. The judge will assess whether the agreement imposes undue hardship on the filer or their dependents and is in their best interest.
When a reaffirmation agreement is properly executed and validly filed with the court, it has the effect of exempting the reaffirmed debt from the discharge order issued by the bankruptcy court.
It is important to consult a bankruptcy attorney to ensure that a reaffirmation agreement is in your best interest and that all the necessary conditions are satisfied for a valid reaffirmation agreement before filing it with the court. They can provide comprehensive guidance and address any specific considerations related to your situation.
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If you have questions about bankruptcy, we invite you to contact us at 480-733-6800. Our experienced attorneys at Davis Miles McGuire Gardner are dedicated to helping you navigate the complexities of personal bankruptcy and providing you with the necessary guidance and support throughout the process.