Signing a reaffirmation agreement is typically in the majority of our clients’ best interests, if they want to keep the property (i.e. car, home or other goods) and can indeed afford the monthly payments.
There are several reasons for this; however, one major reason you may want to agree to reaffirm a debt would be to avoid repossession or foreclosure of the property. If you fall behind even one payment on the debt to that particular creditor, they could quickly move to take back the property, and they will.
Further, sometimes our clients may be behind on their payments when we file a bankruptcy on their behalf. Sometimes creditors will work with you to get caught up on payments but it has been our experience, that without a reaffirmation agreement on file they will not negotiate any type of payment arrangements.
If you do sign the reaffirmation agreement, and you fall behind on a payment, you can contact the creditor directly and typically negotiate payment arrangements, just as you could have prior to filing.
It is very important to know that if you do sign the reaffirmation agreement and completely default in paying the debt, it will NOT be discharged; you will remain liable for any debt associated with your reaffirmation agreement.
Once the signed reaffirmation agreement is on file with the Court, your account with that particular creditor will usually revert back to its post-filing status. That means that prior to you filing for bankruptcy, your creditor may have been reporting your payments to the major credit bureaus. Once your reaffirmation agreement is on file, they should resume this reporting.
This is very important to your fresh start. You want and need to receive credit for your on-time payments, especially after you file for bankruptcy.
Finally, another reason why you may want to reaffirm certain debts is because you want to keep your property and rebuild your credit worthiness with that particular creditor. For example, should you decide not to reaffirm your debt owed to Nebraska Furniture Mart and you simply want to give back the household goods you purchased, per their current policy, you will never again be given credit with them.
If you are worried about whether or not you should sign your reaffirmation agreement, just let us know and we will explain all of your options in detail to you.