Reaffirmation Agreements

A “reaffirmation agreement” is an agreement entered into post-bankruptcy that revives a debt obligation that would otherwise be eliminated at the conclusion of a bankruptcy case. These agreements are used most often with car loans, but sometimes also other secured loans on personal items.

A reaffirmation agreement is voluntary and you are not required to enter into such an agreement. However, some creditors – usual lienholders on vehicles – require that you either reaffirm your debt or surrender the collateral.

Should I reaffirm a debt? The best question to ask yourself in determining whether to reaffirm a vehicle loan is ”would I buy my car today for the amount I owe?” It is common knowledge that vehicle values fall faster than the payoff balance, leaving many vehicles underwater by the time a bankruptcy case is filed. If you owe your creditor far more than the vehicle is worth and you have the ability to find alternate transportation,  it might not be in your best interest to sign a reaffirmation agreement.

Will my lender repossess my vehicle if I do not reaffirm? Some lenders threaten to repossess a vehicle if you refuse to sign their reaffirmation agreement.