Is there ever a good reason for reaffirming a debt?

After filing a bankruptcy petition, debtors should not be surprised if they are approached (through their attorney) about signing a reaffirmation agreement with one or more creditors.

Simply put, a reaffirmation agreement is an agreement to pay an existing debt despite the bankruptcy. Most attorneys and quite a few bankruptcy judges are leery of encouraging debtors to do this; why put your self on the hook for a debt right after you filed a case to get rid of it? The general standing advice to bankrupt debtors is typically to avoid entering into a reaffirmation if it is possible to do so.

But in the current economic climate, with many people attempting to modify (i.e. re-negotiate) their mortgages, there may occasionally be a reason for debtors to consider singing a “re-aff.”

Assume you have just spent months trying to get a modification done on your mortgage — and finally you have succeeded! But now you still need to file a bankruptcy case to eliminate other debts so you can start paying the mortgage again. Once you file a bankruptcy case, however, it is possible that a lender would take the position that the bankruptcy cancels the modification agreement — leaving you basically right back where you started.

In this situation, a formal reaffirmation agreement, hopefully incorporating the terms of the loan modification, could prove useful; the bankruptcy will eliminate the other debts, and the terms of the mortgage are formalized for the future.


By Doug Beaton

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