Bankruptcy Reaffirmation Agreements

A Bankruptcy reaffirmation agreements is an agreement between you and your creditor that you will continue to make regular payments on your debt after the bankruptcy discharge. In most cases creditors will allow you to make payments on the secured debt without signing a reaffirmation agreement. The bankruptcy code does allow creditors to take back property if a reaffirmation agreement is not signed, but as a practical matter this does not happen often. In most cases the creditors are happy to be getting paid on the debt, and do not want the vehicle back. In some cases if you do not sign a reaffirmation agreement the creditor will not report any payments made to your credit report.
The main problem for a bankruptcy debtor is that by signing a reaffirmation agreement they are making themselves personally liable for the debt again after the bankruptcy discharge is granted. In most cases not signing the reaffirmation agreement is the best course of action for people going through bankruptcy. The problem encountered by my clients is that after the bankruptcy they still cannot afford the vehicle payments and it gets taken by the creditor if they signed the reaffirmation agreement the bank can pursue them for the difference between what they owe on the vehicle and what the vehicle sells for at auction. If they did not sign the reaffirmation they cannot be held responsible for the balance of the vehicle if it is taken. The point of a bankruptcy is a fresh start, and signing reaffirmation agreements for vehicles or 2nd mortgages can hinder that fresh start, if the vehicle is taken after the bankruptcy discharge.