Simply put, a reaffirmation agreement is one in which you agree to take a debt out of your bankruptcy. This means that the debt itself will not be discharged (wiped out) by the bankruptcy, and you will continue to owe it until it is paid. After you sign it,it is filed with the bankruptcy court.
Wnen Would I Need One?
These are most often used here in New Jersey with car loans, as most banks require them if you are not going to surrender the vehicle or pay off the loan all at once. Under the bankruptcy code, you have 45 days from the first date you are scheduled to meet with the trustee in your case to sign and return this document to the creditor. It then has to be filed with the court within 60 days of that trustee meeting.
Even after all of this, you can still change your mind by sending a rescision letter to the bank within 60 days of filing the agreement or before your discharge is issued, whichever is later.
Is Reaffirmation a Good Idea?
If you are currently deficit spending (i.e. you spend more than you earn), there is a presumption of undue hardship, which raises a concern about whether you can truly afford the payment.
This presumption can be overcome if you can show to the bankruptcy court why you still feel you can afford it, either through an explanation attached to the Agreement or through your testimony at a Reaffirmation Hearing. Reaffirming a car loan isn't always the best option, and you need to consider several factors before making this decision.
What Should I Do?
If you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.