Reaffirmation of Debt in Bankruptcy

A reaffirmation is a voluntary agreement, between a debtor and a creditor that the debtor will pay all or a portion of an otherwise dischargeable debt after the debtor has filed bankruptcy. To be valid, the debtor must fully understand the fact that it would be entitled to discharge of this indebtedness when and if a discharge is granted in the bankruptcy proceedings, but wishes to repay the debt in return for additional consideration offered by a creditor.

A written agreement to reaffirm a debt must be filed with the Bankruptcy Court, and reaffirmation agreements are subject to court approval. The reaffirmation agreement must contain a clear and conspicuous statement that advises the debtor that the agreement is not required under U.S. bankruptcy law, and the reaffirmation agreement must be signed prior to discharge of the bankruptcy in order to be enforceable.

The debtor must be notified that the agreement may be rescinded by giving notice to the creditor any time prior to the bankruptcy discharge, or within sixty days after the agreement is filed with the Court, whichever is later. The attorney for the debtor must file an affidavit certifying that the agreement represents a fully informed and voluntary agreement. [If an attorney does not represent the debtor, the Court must approve the reaffirmation agreement after proper disclosures to the debtor, and only if the Court finds that reaffirmation is in the best interest of the debtor].

Source: Michael Dennis, author of "Credit and Collection Handbook" available at the NACM Bookstore.