In bankruptcy law, a reaffirmation agreement refers to a document that describes the agreement made between the debtor and a creditor. Through it, the debtor waives discharge of the debt that would otherwise have been discharged through the ongoing bankruptcy proceedings.
How would a reaffirmation agreement work?
Let us say you are going through bankruptcy. Before the bankruptcy is discharged, you may decide that you do not want to lose certain assets. As an example, you may need your car to go about your daily life. Maybe you need it to go to job interviews if you have lost your job. You want to be able to have a conversation with the financing agency that holds your car loan and enter into a reaffirmation agreement with them. Before signing this document, you should know, in the first place, that reaffirmation agreements are not required by law. And secondly, that you must have thought long and hard about these payments and concluded that it would be possible for you to make them every month. As well, you must approach your creditor and they are agreeable to this idea.
So, reaffirmation agreements are strictly voluntary?
They are. And if you wish to reaffirm or agree to pay back any one debt, you must enter into an agreement to do so with your creditor. This would obligate you to pay either the entirety or a portion of the debt in question. You agree to this even though this debt might have been fully wiped out by the bankruptcy.
Both parties must complete the form in which it is spelled out what this debt is all about, what the value of the collateral is, and why you chose to go this route. Then, both parties must sign the agreement.
If you are not represented by a reaffirmation agreement lawyer, the reaffirmation will be set for hearing and you will receive a notice in writing as to the hearing’s date and time.
Is a reaffirmation agreement recognized by all lenders?
It is not. And, since this is the case, you must determine your particular lender’s stance on this matter before going further with this option.
What happens when the reaffirmation agreement is not followed through?
If you have signed a reaffirmation agreement with your lender, promising to make agreed-upon payments, and you fail to do so, the debt remains owed as though no bankruptcy had taken place. The creditor can thus take any actions needed to collect the debt.
Does the Court need to approve the reaffirmation agreement?
The Court does in certain circumstances. In New Jersey, the Court rarely entertains agreements that apply to debt secured by real estate. It also does not approve agreements signed between debtors and credit unions. These are filed and become part of the record but do not get a hearing. The Court will review other agreements, especially car loans. Also the Court will review the reaffirmation agreement for any “undue hardship” (meaning that the debtor may not have sufficient funds for the monthly payment) but that can be avoided by experienced counsel.
Is it possible to cancel the reaffirmation agreement?
This agreement may be canceled at any point as long as it happens before the entry of your bankruptcy discharge or within 60 days after it is filed with the Court, whichever happens later. In order to rescind it, you must mail a written notice to your creditor in which you inform them of your intention to withdraw from the agreement. Get the legal advice of a New Jersey bankruptcy lawyer who can guide you as to how it must be worded, what it must include, and what form must be used.
Get Legal Help with your Reaffirmation Agreement
A New Jersey bankruptcy attorney from the law office of Stuart M. Nachbar, P. C. is ready to give you the legal guidance you require at this time. Make an appointment today to set up your initial consultation and explain your case.