Legally reviewed by Allen A. Kolber, Esq. - The Law Offices of Allen A. Kolber, Esq., P.C.
Key Takeaways
- If your attorney certifies the agreement, the court usually never reviews it.
- You can cancel until discharge, or 60 days after the agreement is filed, whichever is later.
- That 60 days runs from the agreement’s filing, not your case’s.
- Reaffirming puts the debt back on you permanently, including any shortfall after a repossession.
You may know that your consumer bankruptcy case legally releases certain debts from your immediate financial responsibility, in what is known as a bankruptcy discharge. However, even though this is lawful and entirely part of the process, you may still feel a sense of guilt in doing so. That is, you may usually be a person of your word and regret falling short of your end of the agreement with certain creditors. With this, you may want to attempt to pay them back anyway by incorporating a reaffirmation agreement into your bankruptcy plans. Well then, please follow along to find out the purpose of a reaffirmation agreement and how a proficient Rockland County Chapter 7 bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. can help you decide whether signing one is in your best interest.
What Is a Reaffirmation Agreement in a Bankruptcy Case?
Typically used during Chapter 7 bankruptcy proceedings, a reaffirmation agreement is a legally binding contract between you (i.e., the debtor) and your creditor, with which you voluntarily commit to repaying a debt that would otherwise be discharged after your case. The most common reason why debtors sign up to do this is so that they may keep the collateral securing a certain loan. For example, you may want to initiate a reaffirmation agreement for both your mortgage and car loan so that you may guarantee that your home and automobile stay in your possession.
When Is Signing a Reaffirmation Agreement a Good Idea?
When providing your signature at the bottom of a reaffirmation agreement, you promise to continue making debt payments to a certain creditor under original or modified terms. In other words, you are signing up for an ongoing financial obligation.
Ultimately, whether or not the court is required to approve the agreement depends on whether or not you have an attorney. If your attorney has negotiated the agreement and certifies that it does not result in you bearing an undue hardship, the agreement will generally take effect without court approval. However, if you are filing without an attorney, the court must hold a hearing and approve the agreement before it legally binds you.
When the Numbers Don’t Work, the Court Will Intervene Regardless
One exception that surprised many is that if your monthly income, with monthly expenses subtracted, is less than the payment you are attempting to make, the law will presume that the reaffirmation agreement is an undue hardship. As such, if that is applied, the court will review the agreement even though you are represented, and your discharge will be held until the court issues a decision. You may rebut this presumption by explaining, in writing, where the money will come from. However, you will need to explain this, rather than assert it.
You Can Change Your Mind, but Not Forever
This is the protection almost nobody mentions, and it is worth knowing before you sign anything. Even after the agreement is signed and filed, you may cancel it. The window runs until your discharge is entered, or until 60 days after the agreement was filed with the court, whichever of those comes later.
Note what that deadline is measured from. It is 60 days from the filing of the agreement, not from the filing of your bankruptcy case and not from your discharge. Rescinding is done in writing and delivered to your creditor, and once you do it the debt goes back to being discharged like any other.
The Agreement Itself Also Has a Deadline
A reaffirmation agreement must be filed with the court no later than 60 days following the first set date for the meeting of creditors, though it may be extended by a judge. Practically, however, it must be done before a discharge occurs, as once the debt is gone, there is nothing left to reaffirm.
In the end, with a reaffirmation agreement, you essentially give up a piece of your opportunity for financial relief that you would have otherwise been allotted with your bankruptcy case. And if you ultimately fail to uphold your end of the agreement, you may do nothing but worsen your already poor financial standing. This is why we will help you think long and hard about this big decision.
Contact an Experienced New York Bankruptcy Attorney Today
If you require legal representation, look no further than a talented Rockland County bankruptcy attorney. At The Law Offices of Allen A. Kolber, Esq., P.C., we understand that navigating bankruptcy can be overwhelming and nerve-wracking, which is why we are committed to guiding you through every step of this process so you can reap the benefits. If you’re ready for a financial refresh, do not hesitate to contact our firm today.
