Legal Definitions - reaffirmation hearing

Reaffirmation Hearing

A reaffirmation hearing is a formal court proceeding that takes place during a bankruptcy case. Its purpose is for a debtor (the person filing for bankruptcy) and a creditor (the company or individual they owe money to) to present an agreement to the court. This agreement asks for judicial approval to continue paying a specific debt that would otherwise be eliminated (discharged) by the bankruptcy.

Debtors typically choose to reaffirm a debt when they want to keep an asset that secures the debt, such as a car or a home. The court reviews the reaffirmation agreement to ensure it is voluntary, does not impose an undue hardship on the debtor, and is in the debtor's best long-term interest.

• Example 1: Keeping a Car After Bankruptcy

  Sarah files for Chapter 7 bankruptcy. She has a car loan and needs her car to get to work. While her bankruptcy would normally discharge (eliminate) this debt, she wants to keep her vehicle. Sarah and the car loan company agree that she will continue making her car payments as before. They present this formal agreement to the bankruptcy judge at a reaffirmation hearing. The judge will review Sarah's income and expenses to confirm that she can afford the payments and that keeping the car is essential for her and not an unreasonable financial burden.

• Example 2: Retaining a Home Mortgage

  Mark and Lisa are undergoing Chapter 7 bankruptcy, but they wish to keep their family home. Their mortgage debt would typically be discharged in bankruptcy. To prevent foreclosure and retain ownership of their house, they negotiate with their mortgage lender to sign a reaffirmation agreement. At their reaffirmation hearing, the judge examines their financial situation, including their ability to make future mortgage payments, to ensure that reaffirming this significant debt is a sound decision for their financial future and not an undue hardship.