Legal Definitions - reaffirmation

In the context of bankruptcy, a reaffirmation is a formal, legally binding agreement made between an individual who has filed for bankruptcy (the debtor) and a lender (the creditor). Through this agreement, the debtor voluntarily promises to continue paying a specific debt even after their bankruptcy case is completed and the debt would otherwise have been legally wiped out, or 'discharged.'

The primary reason a debtor might choose to reaffirm a debt is to keep property that secures that debt, such as a home or a valuable item. Without reaffirmation, the creditor could repossess or foreclose on the property once the debt is discharged. A reaffirmation agreement essentially creates a new contract, obligating the debtor to repay the debt under new or existing terms.

Because reaffirmation agreements go against the fundamental 'fresh start' principle of bankruptcy, which aims to relieve debtors of their financial burdens, they are subject to strict legal requirements and court review. This ensures the debtor fully understands the commitment, that the agreement does not impose an undue hardship, and that it is in the debtor's best interest, especially if they are not represented by an attorney.

Here are some examples to illustrate how reaffirmation works:

• Home Mortgage: Imagine a family files for Chapter 7 bankruptcy but desperately wants to keep their primary residence. Their mortgage debt would typically be discharged in bankruptcy, meaning they would no longer be personally obligated to pay it. However, to prevent the bank from foreclosing on their home, they might enter into a reaffirmation agreement with their mortgage lender. This agreement legally obligates them to continue making their mortgage payments after the bankruptcy is finalized, allowing them to keep their house.
• Essential Household Appliances: Consider an individual who files for bankruptcy and has a loan specifically for their new refrigerator and washing machine. These appliances are essential for daily life, and the loan is secured by them. To avoid having the creditor repossess these items, the individual could choose to reaffirm the debt for the appliances. By doing so, they promise to continue making payments on that specific loan, thereby retaining ownership and use of their refrigerator and washing machine despite the bankruptcy filing.
• Sentimental Jewelry Loan: Suppose someone took out a loan using a valuable, sentimental family heirloom necklace as collateral. If they later file for bankruptcy, this debt would normally be discharged. However, if they wish to keep the necklace, which holds immense personal value, they might enter into a reaffirmation agreement with the lender. This commits them to repaying that specific loan according to its terms, ensuring they can retrieve and keep the sentimental item rather than having the creditor take possession of it.