In a Chapter 7 bankruptcy, you may want to pay an otherwise dischargeable debt, such as your car note. To do so, you request a reaffirmation agreement from your car creditor. The loan company may accept or deny your request. If they accept that you keep the vehicle, your agreement’s new terms are stated in the reaffirmation agreement. If they reject your request, the loan company will repossess your car without you owing anything further.
You should not take reaffirmation agreements lightly because the debt contemplated in them will survive a bankruptcy discharge. It means that you will complete your bankruptcy and still will owe the reaffirmed debt.
In reaffirmation agreements, it is possible to renegotiate the terms of the original loan. However, in most cases, the original contract terms are reaffirmed. Consider whether or not the reaffirmed debt is in your and your family’s best interest. Do you truly need the vehicle you are keeping? Is it in good condition? Can you get one for less money or at a lower interest rate? Will the monthly payment cause hardship for you or your family?
Can you cancel a reaffirmation agreement?
Yes, you can cancel the agreement within 60 days of its filing with the court. Once your cancellation period expires and the court approves the reaffirmation, you are legally obligated to abide by the agreement.
The court can also reject an agreement if it finds that the debt proposed to be reaffirmed creates an undue hardship on you. Generally, the court looks at your budget to determine if you can genuinely afford the payments.