What is a Reaffirmation Agreement after Discharge from Bankruptcy?

A lot of people have certain preconceptions about bankruptcy and when faced with needing to file, have no idea what they’re doing. Time and time again, I see people who try to go it alone or use a bankruptcy preparer only to end up in a serious mess. Bankruptcy is handled in federal court, and you do not want to be in a serious mess in front of the federal bench. Many people think that bankruptcy is as simple as saying you’re broke, filing papers to prove it, and walking off free and clear.

Hold up.

Not so fast.

Life is complicated, and even a ‘simple’ Chapter 7 liquidation bankruptcy has a lot of paperwork, rules, details, and prerequisites. One of these details is called a reaffirmation agreement, and it can trip you up if you don’t know what you’re doing.

Breaking Down a Reaffirmation Agreement after Discharge

A reaffirmation agreement after discharge means that a debt is still your responsibility to pay, even after your bankruptcy is discharged. Per this agreement, you will pay so much per month at X interest rate until the debt is paid off. Defaulting on the debt means that your creditor may take actions to collect on the debt such as garnishing wages and property. You are not required to enter into a reaffirmation agreement after discharge, and there is no law to make you do so. However, it’s a good idea only to make one of these agreements only if it’s in your best interests, such as to retain possession of your car or other property.

If your creditor has a lien on the property or if the item is collateral – such as for a home or vehicle – then you must clear the lien or make the agreed-upon payments or the creditor may force the sale of the property. You must redeem the property in a way that the court has previously approved either with a single payment or a payment plan, or even a sale that is agreed by both you and your creditor. 

Timing is Everything

A reaffirmation agreement after discharge has to be confirmed by the court before your bankruptcy is discharged. You or the creditor with whom you have the agreement need to file it no later than 60 days after your first 341 meeting. Remember, the court must approve most reaffirmation agreements, and may need to schedule a separate hearing to do so. The court may also extend the deadline for filing past the 60 day limit, but you can’t depend on that happening if you are going to file, try your best to do it within the limit.

“What If I Want Out?”

Once again, there’s a timetable – it’s 60 days from the date that the agreement is filed with the court and before your discharge occurs. To do this, you have to notify the creditor that you are rescinding the agreement. After your bankruptcy is discharged you will not be able to rescind the agreement without reopening your bankruptcy case, then file a motion to vacate the agreement. That’s not going to be easy and the courts may deny either motion. 

“Give Me More Detail?”

Lots of people try to DIY (pro se in Legalese) their bankruptcy or use a ‘bankruptcy preparer‘ to keep costs down. When it comes to a reaffirmation agreement after discharge while pro se there are a number of fiddly conditions and procedures before the agreement becomes effective. As “reaffirmation agreement after discharge” states in the name, performing the conditions of the agreement has to wait until after the bankruptcy is discharged. Any attempt by the creditor to get you to perform before discharge amounts to a collection action subject to the automatic stay. 

Now, about those fiddly pro se conditions, I’ve bullet-pointed a lot of them below.

• Once filed, the court will either affirm or deny the agreement – it does not go into effect after a hearing.
• At the hearing, which you must attend, the judge will read the agreement and then rule whether to affirm the agreement or deny.
• The judge will decide if the agreement is in your best interests, or if there is a likelihood that your agreement may cause undue hardship and increase the probability that you will default.
• If your agreement involves a secured debt such as a mortgage, car note, trust deet, or other instruments, then you do not need to file a motion or attend a hearing. Meaning that you are stuck with the agreement unless you rescind it.

Special conditions also apply as to whether or not you were represented by an attorney and whether or not your creditor is a credit union. If your agreement is with a credit union and you have been represented in bankruptcy by an attorney, the agreement is effective when and as filed with the court.

If you were represented by an attorney and your creditor is not a credit union, then the agreement is filed and reviewed to make sure that it will not cause undue hardship. If the court believes that the reaffirmation agreement will cause undue hardship, then there may be a hearing during which your attorney may argue that the agreement will not cause undue hardship. The court may find for your argument, but on the other hand they may deny your argument and nullify the agreement. 

Eyes Spinning Yet?

Van Horn Law began operations in 2009, the rock bottom of the last recession, providing South Florida citizens with protection of their financial rights even in severe debt. If you are facing foreclosure, garnishment, bankruptcy, and other issues that come with debt, you need to bring those issues to us. We can and will help – even to the point of offering a $0 down bankruptcy. We have offices In Miami, West Palm Beach, and Fort Lauderdale, with consultations offered by phone and video conference. Even better, your first consultation is free. Call us today!