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Reaffirmation agreements are the subject of great debate. Secured creditors, like auto lenders, want you to sign them if you file Chapter 7 bankruptcy. Reaffirmation agreements prevent debt from being discharged, and lenders like that. But because your discharge is the Holy Grail of the bankruptcy process, you need to weigh your options very carefully before signing a reaffirmation agreement.
Recent BLN Posts on Reaffirmation
Recently, we’ve had several posts here on Bankruptcy Law Network about reaffirmation agreements. My colleague, David Liebowitz, outlined the reaffirmation process in his post, “Why Do I Have to Reaffirm My Car Loan?” Craig Andresen posted, “Retain and Pay Rejected by Appeals Court,” in which he discussed a recent decision by the 4th Circuit Court of Appeals. Mark Buckley posted, “Why Would I Ever Sign a Reaffirmation Agreement?” And Jed Berliner posted, “Do Not Reaffirm in Massachusetts If Current,” which tells debtors in that state that there’s simply no reason to reaffirm any debt.
The Law Interpreting Reaffirmation Agreements is Different from State to State
If you talk to bankruptcy lawyers in different parts of the U.S., you’ll quickly discover reaffirmation agreements are treated very differently throughout the country. The reaffirmation provisions of our new and greatly flawed Bankruptcy Code are inartfully drafted. This has lead to a wide variety of interpretations and decisions based largely on the state in which your bankruptcy case is filed.
What Should You Do? Reaffirm or Not?
All of the recent posts I’ve mentioned above are excellent, and if you are considering reaffirmation, you should take a look at all of them. Mark Buckley raises some very good points about why you should decline to reaffirm. As Mark points out, “signing [a reaffirmation agreement] is like putting your foot in a bear trap.” It undoes the effect of your discharge as to that particular debt.
The law is important, and you should understand it. But reality is more important. In “Reaffirmation Agreements: ‘Let Them Eat Steel!’ (Part Two),” I’ll discuss the reality of your relationship with your auto lender.
Russell A. DeMott is a Charleston, South Carolina bankruptcy lawyer who helps people file Chapter 7 and Chapter 13 bankruptcy.
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