A reaffirmation agreement is a voluntary contract, signed during a Chapter 7 bankruptcy, in which you agree to keep paying a debt that would otherwise be wiped out. People usually sign one to keep a car or other property that secures a loan. Reaffirming means you stay personally liable for that debt after your case ends (11 U.S.C. 524(c)). It is never required, it must be signed before your discharge, and you can cancel it before your discharge or within 60 days after it is filed with the court, whichever is later.
When you file Chapter 7, most of your debts are eliminated. But if you have a car loan or another loan tied to property you want to keep, the lender still has a lien on that property. That is where reaffirmation comes in, and it is one of the most important decisions in a Chapter 7 case. Sign the wrong agreement and you could walk out of bankruptcy still owing money on a car you cannot afford. Skip one you needed and you could lose property you rely on. This article explains how reaffirmation works, what protections the law builds in, and how it compares to your other options.
A secured debt is a loan backed by property, called collateral. Your car loan is secured by the car. Your mortgage is secured by your house. A Chapter 7 discharge eliminates your personal obligation to pay, but it does not remove the lender’s lien on the collateral. If payments stop, the lender can still take the property back. So for every secured debt, you need a plan for what happens to the property. Our guide on what happens to your car when you file bankruptcy in Florida walks through how this plays out with vehicles specifically.
Early in a Chapter 7 bankruptcy, you file a statement of intention telling the court and your creditors what you plan to do with each piece of secured property (11 U.S.C. 521(a)(2)). The main choices are these.
Reaffirmation runs on a tight schedule. Your statement of intention is due within 30 days after you file or by the date of your 341 meeting, whichever is earlier (11 U.S.C. 521(a)(2)(A)). You are then expected to carry out that intention within 30 days after the first date set for the 341 meeting (11 U.S.C. 521(a)(2)(B)). For personal property such as a car bought with the loan, if you do not reaffirm or redeem within 45 days after the first 341 meeting, the automatic stay protecting that property can end and the lender may pursue its remedies (11 U.S.C. 521(a)(6)). Your attorney tracks these dates, but knowing they exist helps you make the decision in time.
Because reaffirming means giving up part of your fresh start, Congress added safeguards (11 U.S.C. 524(c)).
There is also a built in affordability check. If your monthly income minus your monthly expenses is less than the payment you are reaffirming, the law presumes the agreement is an undue hardship, and the court can review it (11 U.S.C. 524(m)(1)). This presumption does not apply when the lender is a credit union (11 U.S.C. 524(m)(2)).
Reaffirmation is a decision only you can make with your attorney’s guidance, but these questions help frame it.
If the answers point toward reaffirming, it can be a good way to keep reliable transportation. If they point the other way, walking away from an overpriced loan may be one of the biggest benefits of the bankruptcy. Reaffirmation can also affect other people, and our guide on how bankruptcy affects co-signers explains why some filers reaffirm to protect a family member who signed the loan.
Mortgages work differently in practice. Many Chapter 7 filers who keep their homes continue making mortgage payments without signing a reaffirmation agreement. Their personal liability is discharged, but the mortgage lien remains, so the home can still be lost if payments stop. Whether reaffirming a mortgage makes sense is a question for your attorney. Florida’s homestead protections, explained in our guide Will I Lose My House If I File Bankruptcy in Florida?, are a separate issue from the mortgage itself.
Reaffirmation agreements are a Chapter 7 tool. In Chapter 13 bankruptcy, secured debts you want to keep are generally handled through your repayment plan instead. That plan may offer options for catching up on missed payments over time.
The goal of bankruptcy is a fresh start you can sustain. A reaffirmation agreement can protect property you depend on, but it also carries debt past your discharge. Taking time to weigh the payment, the property’s value, and your budget helps you avoid trading one financial burden for another. Once your case is complete, our guide on rebuilding your credit after bankruptcy covers the next steps.
Deciding whether to keep your car or other property is easier with someone in your corner. The attorneys at Parker & DuFresne have helped Northeast Florida families through Chapter 7 and Chapter 13 since 1994. Call 904-606-9069 for a free consultation.
It is a voluntary agreement, signed during a Chapter 7 case, to keep paying a debt that would otherwise be discharged. It is usually used to keep a car or other property that secures a loan, and it leaves you personally liable for that debt after bankruptcy (11 U.S.C. 524(c)).
No one can force you to reaffirm. Reaffirming is one way to keep a financed car. Redemption is another, and some lenders allow you to keep the car while payments stay current without reaffirming. Your attorney can explain which options fit your loan.
Yes. You can rescind it any time before your discharge or within 60 days after the agreement is filed with the court, whichever is later (11 U.S.C. 524(c)).
Because a reaffirmed debt survives bankruptcy, the lender can repossess the property and may also pursue you for any remaining balance, just as if you had never filed. That is why affordability matters so much before signing.
The agreement must be made before your discharge is granted (11 U.S.C. 524(c)). For personal property bought with the loan, you generally must reaffirm or redeem within 45 days after the first 341 meeting or the automatic stay on that property can end (11 U.S.C. 521(a)(6)).
If you have an attorney who signs the required declaration, court approval is generally not needed. If you do not have an attorney, the court must approve it after a hearing, except for consumer debts secured by real property (11 U.S.C. 524(c) and (d)). The court may also review agreements presumed to be an undue hardship (11 U.S.C. 524(m)).
Redemption lets you keep personal property by paying the lender a lump sum equal to the property’s current value rather than the full loan balance (11 U.S.C. 722). It can make sense when you owe much more than the property is worth.
Many Chapter 7 filers keep their homes by continuing to pay the mortgage without reaffirming. Their personal liability is discharged, but the lien remains. Whether reaffirming makes sense depends on your situation and is a question to discuss with your attorney.
Yes. The law does not stop you from voluntarily repaying a discharged debt (11 U.S.C. 524(f)). The difference is that without a reaffirmation agreement, you are not legally required to keep paying.
Reaffirmation is a Chapter 7 tool. In Chapter 13, secured debts you want to keep are generally addressed through your repayment plan.
Parker and DuFresne
