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What is a reaffirmation agreement?

A reaffirmation agreement is an agreement by which a bankruptcy debtor becomes legally obligated to pay all or a portion of an otherwise dischargeable debt. A reaffirmation agreement must be filed on Official Form 2400A (preferred by the court) or Official Form 2400A/B Alt and, in either case, the form must be attached to the cover sheet, Official Form 427.

A reaffirmation agreement is strictly voluntary. It is not required by the Bankruptcy Code or other state or federal law. A debtor can voluntarily repay any debt instead of signing a reaffirmation agreement, but there may be valid reasons for wanting to reaffirm a particular debt. Because a reaffirmation agreement makes the debtor's discharge ineffective as to the reaffirmed debt, a debtor should seek the advice of an attorney before agreeing to reaffirm a debt.

All blanks in a reaffirmation agreement must be completed accurately as of the date the debtor signs the agreement. Frequently, reaffirmation agreements do not correctly report the debtor’s income and expenses. If a blank in the agreement asks for the debtor’s expenses excluding payment on the debt to be reaffirmed (in part II.C.1.b. of OF 2400A or part D.1. in OF 2400A/B Alt), do not include payments on the debt to be reaffirmed as part of the expenses. If a creditor sends the debtor a proposed reaffirmation agreement, the debtor is responsible for confirming that all information in blanks completed by the creditor is correct. The court can either postpone a reaffirmation hearing or disapprove a reaffirmation agreement if it does include any incorrect information.

A reaffirmation agreement must be filed within 60 days after the first date set for the meeting of creditors unless the court enlarges that time. The court will not take any action to approve a reaffirmation agreement that is filed after a discharge order has been entered or in a closed case unless the case is reopened.

If the debtor was not represented by an attorney during the course of negotiating the agreementor if a presumption of undue hardship has been established with respect to the agreement which has not been rebutted to the satisfaction of the courtand the debt is not a consumer debt secured by real property, the court will hold a hearing to consider approval of the agreement. The debtor must attend the hearing. To become enforceable, the agreement must be approved by the judge. To approve the agreement, the judge must decide that approval would be in the debtor’s best interest and would not impose an undue hardship on the debtor or the debtor’s dependents. An agreement is presumed to be an undue hardship if it shows that the debtor has insufficient income to make payments on the reaffirmed debt and the debtor’s other expenses. If undue hardship is presumed, the court can approve the agreement only if the debtor rebuts the presumption.

The court will not hold a hearing on and will neither approve nor disapprove any reaffirmation agreement for which the debt is a consumer debt secured by real property because court approval is not necessary for these types of reaffirmation agreements to be enforceable. The court will also not hold a hearing on a reaffirmation agreement for which the debtor was represented and the attorney did not sign the agreementsuch agreements are unenforceable.

Even if the debtor signs a reaffirmation agreement, the debtor has 60 days after the agreement is filed with the court (or the date of entry of discharge, whichever is later) to change the debtor’s mind and rescind the agreement. To rescind the agreement, the debtor must send notice to the creditor that the reaffirmation agreement is being rescinded and should file it with the court.

If the debtor reaffirms a debt, does not timely rescind the agreement, and fails to make the payments or otherwise perform the obligation as agreed, the creditor can recover any property that was given as security for the debt, and the debtor may remain personally liable for any remaining debt after the collateral is sold.

For more information, click here to view a video on the court's website in which former Chief Judge Brown discusses reaffirmation agreements.

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