Reaffirmation Agreements in Chapter 13

When filing for bankruptcy under Chapter 13, individuals are required to submit a repayment plan that details how they intend to pay off their debts over a period of three to five years. However, circumstances can change during this time, and debtors may find themselves unable to keep up with their payments. In such cases, a reaffirmation agreement may be an option.

A reaffirmation agreement is a contract between the debtor and a creditor that allows the debtor to keep an asset, such as a car or home, while continuing to make payments on the debt. Essentially, the debtor agrees to reaffirm the debt and continue making payments as if the bankruptcy had never been filed.

The process for entering into a reaffirmation agreement is relatively straightforward. First, the debtor must file a motion with the bankruptcy court requesting permission to enter into the agreement. The motion must include details about the debt, the creditor, and the terms of the proposed agreement. The creditor must also agree to the terms of the agreement and sign a form acknowledging their consent.

Once the court approves the motion, the debtor can sign the reaffirmation agreement and begin making payments. However, it`s important to note that reaffirming a debt has its risks. If the debtor is unable to make the payments, the creditor can take legal action to collect the debt, even if they have already been discharged through the bankruptcy.

Additionally, the bankruptcy court must determine that the agreement is in the debtor`s best interest. This means that the debtor must have a reasonable ability to pay the debt and must not be putting themselves in financial hardship by doing so. If the court determines that the agreement is not in the debtor`s best interest, they may deny the motion.

In summary, a reaffirmation agreement can be a useful tool for debtors who want to keep a valuable asset while continuing to make payments on their debts. However, it`s important to carefully consider the risks and benefits before entering into such an agreement. Working with a knowledgeable bankruptcy attorney can help ensure that the agreement is in the debtor`s best interest and that the process goes smoothly.