For those who are contemplating filing for bankruptcy protection one of the most important aspects of the process is how once a person has been discharged from bankruptcy they no longer are obligated to pay a debt. While this is great in many cases, there are some instances where a debtor might prefer to pay the debt anyway, even if it has been formally discharged. The agreement allowing this is what’s known as a reaffirmation agreement.
What is a reaffirmation agreement?
A reaffirmation agreement is a contract reached between two private parties and is not a standard part of the bankruptcy process. The agreement is signed between the debtor and the creditor who legally owns the property at issue. The agreement must also be approved by the bankruptcy court overseeing the process. There are other rules that the reaffirmation agreement must follow and if the person signing the reaffirmation agreement is not represented by a lawyer then a hearing will be held to ensure that the agreement complied with the rules.
What are some of these rules?
The law says that reaffirmation agreements must be entered into voluntarily, that they cannot place undue financial hardship on the debtor, that they must be in the debtor’s best interest and that they can be terminated any time before a person’s bankruptcy has been officially discharged or within 60 days of the time that the agreement was filed with the court, whichever is longer.