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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. All reaffirmation agreements must be filed using Official Form 2400A (preferred by the court) or Official Form 2400A/B Alt and in either case attach Official Form 427 as a cover sheet. To be timely, such an agreement must be filed by the debtor within 60 days after the first date set for the meeting of creditors. See LBR 4008-1. The court will not take any action to approve a timely filed reaffirmation agreement until such time as the debtor is eligible for immediate discharge. The court will not take any action to approve a reaffirmation agreement that is filed in a closed case or filed after a discharge order has been entered in a case.

Reaffirmation agreements are strictly voluntary. They are 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.

If the debtor is represented by an attorney, and the reaffirmation agreement and cover sheet indicate a presumption of undue hardship, a hearing will be scheduled, even if the attorney signs the certificate indicating that in his or her opinion the debtor can make the payments called for under the reaffirmation agreement. The debtor and debtor's attorney must attend this hearing and offer evidence to rebut the presumption of undue hardship.

If the debtor is not represented by an attorney, and a reaffirmation agreement is filed, the court must also schedule a hearing. The debtor is required to attend this hearing. To be effective, the reaffirmation agreement must be approved by the judge as consistent with the debtor's best interests, unless the debt to be reaffirmed is for a consumer debt secured by a mortgage, deed of trust, security deed, or other lien on real property. Since a reaffirmation agreement takes away some of the effectiveness of the debtor's discharge, it is advisable to seek legal counsel before agreeing to a reaffirmation. 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 his/her mind and rescind the agreement. In either event, to rescind a reaffirmation agreement, the debtor must notify the creditor that the reaffirmation agreement is being rescinded. If the debtor reaffirms a debt, does not rescind the agreement, and fails to make the payments as agreed, the creditor can take action against the debtor to 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 Chief Judge Brown discusses reaffirmation agreements.

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