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A reaffirmation agreement is an agreement
that you will pay all or a portion of the debt, even though you filed
bankruptcy. In return, the creditor promises that, as long as payments are
made, the creditor will not repossess or take back its collateral. This
means that you will remain personally liable on that debt.
The following is helpful information re: reaffirmation agreements
published by the Florida Bar:
REAFFIRMATION AGREEMENTS: PUBLISHED BY THE FLORIDA BAR
A GUIDE FOR FLORIDA DEBTORS BUSINESS LAW SECTION-January 2001
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INTRODUCTION to Bankruptcy Reaffirmation
The primary purpose in filing for Chapter 7 bankruptcy relief is for a
person known in bankruptcy as “the Debtor” to get a discharge that is, to
get rid of old debts or financial obligations. Sometimes one of your
creditors may ask you at your Creditors’ Meeting, on the phone or by mail
to sign a Reaffirmation Agreement in order to keep a car, a computer, or
furniture or appliances that you financed. A Reaffirmation
Agreement is your new contract or legal promise to keep a specific debt
even though your other obligations will be gone. If any of your creditors
ask you to sign a Reaffirmation Agreement, you have an important decision
to make and should be cautious. You may want to consider the points made
in this information sheet. This paper has been published by the Business
Law Section of The Florida Bar to help you make a more informed choice
before agreeing to remain responsible for debts that could be wiped out in
bankruptcy. This pamphlet may not address all of your questions regarding
Reaffirmation Agreements. [Please call our office for legal advice
regarding reaffirmation agreements].
CHOICES
In Florida, you have three choices in dealing with collateral or property
that has been financed such as an automobile loan:
1. Return the property and get rid of the debt;
2. Keep the property and keep the debt by signing a Reaffirmation
Agreement so you will have to continue to make payments like you did
before bankruptcy; or
3. Keep the property by redeeming or paying the whole value of the
property in cash. (This last option is very rarely used by Debtors).
ASK FOR DOCUMENTS AND INFORMATION
Before reaffirming any debt, you should ask your creditor to give you:
1. Copies of documents that prove the creditor has a right to repossess,
“repo” or take away your property (such as a security agreement or
installment contract and UCC-1 Financing Statement or Certificate of
Title);
2. How much you have to pay to keep the property under a Reaffirmation
Agreement and the terms under which the debt will be repaid such as
weekly, monthly or quarterly payments.; and
3. A statement of the redemption value of the collateral which is the
amount you have to pay in cash at one time to pay off the loan and keep
the property.
REASONS NOT TO REAFFIRM in Bankruptcy Cases
You generally SHOULD NOT reaffirm debts under the following situations:
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The debt is totally unsecured by any
property.
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The creditor cannot provide the necessary
paperwork to establish that the debt is secured. |
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You really don’t want to keep the property
and are willing to give it back to the creditor. |
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You are way behind in payments and there is
a high probability that the property will be repossessed anyway at a
later date. |
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The creditor is threatening to file a
lawsuit in the bankruptcy court for collection of the debt unless
you agree to reaffirm. |
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The debt to be reaffirmed is not now secured
by any property but the creditor is offering to give you new credit.
(There may be other cheaper ways to obtain new credit.) |
WHEN YOU MAY WANT TO REAFFIRM in Bankruptcy
Cases
Assuming the creditor can prove that it is
properly secured in the collateral and has the
right to “repo” the property if you don’t pay, you
MAY want to reaffirm a debt under the following
circumstances:
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It is essential that you keep the property
(such as a car to get to and from work) and you have no ability to
get another one for an cheaper amount
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You need to keep the property and have been
unable to get the creditor to agree to a reduced payoff amount
(redemption amount) |
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You have the ability to bring and keep the
payments current because other debts will be discharged. |
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The creditor gives you something of value in
return for signing the Reaffirmation Agreement, such as a written
promise to let you catch up on the past payments in a affordable
way, to reduce the interest rate, or to reduce the total amount of
the debt to the value of the property or some other reasonable
amount. |
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You need to reaffirm the debt to protect a
“codebtor” (another person who is also liable to repay the debt). |
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Bankruptcy Reminder
A Debtor should always remember that the signing of a Reaffirmation
Agreement is a voluntary act and the bankruptcy law does not encourage the
reaffirmation of dischargeable debts. You have the right to refuse to sign
the agreement, although you may have to give up the financed property.
Importantly, the Reaffirmation Agreement is not valid and binding on you
unless the Bankruptcy Court approves it. You also have the right to try
and negotiate different terms for a Reaffirmation.
Jay Matthew Weller,
Attorney at Law
Bankruptcy Attorneys
Tampa Bay Florida
and Debt Consolidation Legal Services
Florida Law Firm with Offices in
Tampa Clearwater (Headquarters) Lakeland Port
Richey
Phone: 1-800-407-3328 (DEBT)
www.jayweller.com
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