Should you sign a reaffirmation agreement in your bankruptcy case?

If you have filed a Chapter 7 bankruptcy and if you have secured debt, one question you will be asked is whether or not you want to “reaffirm” your secured debt.   Secured debt is debt that is backed by collateral such as your home or car.  In other words, if you fail to pay the debt, the creditor can take the collateral to satisfy all or part of your obligation to pay back the money that you borrowed. 

A reaffirmation agreement is a binding agreement between you and your secured creditor.  This is an agreement offered by the creditor.  Once signed, this agreement requires you to continue to make payments to the creditor even though this debt was listed in your bankruptcy case.  In other words, you will still owe the reaffirmed debt after your bankruptcy case is over.  Therefore, if you are unable to make the payments on the debts you reaffirmed, your creditor can sue you to recover the money after  your bankruptcy case is over.

Because you will still be liable for the reaffirmed debts after your bankruptcy case is over, you should be very careful about entering into these agreements.  You should make sure that you can afford the payments and that you really want to keep the collateral before entering into a binding agreement.