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Understanding Reaffirmation Agreement [Bankruptcy]: A Comprehensive Guide
Definition & Meaning
A reaffirmation agreement is a voluntary contract between a debtor who has filed for Chapter 7 bankruptcy and a creditor. In this agreement, the debtor commits to repay all or part of the debt owed to the creditor, even though they are undergoing bankruptcy proceedings. The primary goal of a reaffirmation agreement is to allow the creditor to retain collateral or mortgaged property that could otherwise be repossessed. By entering into this agreement, the debtor also waives the right to have that debt discharged in bankruptcy.
Table of content
Legal Use & context
Reaffirmation agreements are primarily used in bankruptcy law, particularly in Chapter 7 cases. They enable debtors to keep certain secured assets, like a car or home, while still discharging other debts. These agreements must comply with specific legal requirements to be enforceable. Users can manage reaffirmation agreements through legal templates, such as those available from US Legal Forms, which can simplify the process of creating and filing the necessary documents.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A debtor files for Chapter 7 bankruptcy and has a car loan. They enter into a reaffirmation agreement with the lender, agreeing to continue making payments on the car loan to keep the vehicle.
Example 2: A debtor wishes to keep their home during bankruptcy. They sign a reaffirmation agreement with the mortgage lender, agreeing to pay the mortgage despite the bankruptcy filing. (hypothetical example)
Relevant laws & statutes
The primary statute governing reaffirmation agreements is 11 USCS § 524, which outlines the requirements and conditions under which these agreements are valid and enforceable.
State-by-state differences
State
Notes
California
Reaffirmation agreements must be reviewed by the court to ensure they do not cause undue hardship.
Texas
Debtors are encouraged to seek legal advice before signing reaffirmation agreements.
New York
Specific forms must be used for reaffirmation agreements, and they must be filed with the court.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Common misunderstandings
What to do if this term applies to you
If you are considering a reaffirmation agreement, it is crucial to understand the implications. Review the agreement carefully and consider consulting with a legal professional to ensure it is in your best interest. You can also explore US Legal Forms for templates that can help you create the necessary documents. If your situation is complex, seeking legal advice is highly recommended.
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Typical fees for filing a reaffirmation agreement vary by jurisdiction.
Jurisdiction: Federal bankruptcy court.
Possible penalties for failing to comply with reaffirmation requirements may include loss of collateral.
Key takeaways
Frequently asked questions
If you do not sign a reaffirmation agreement, the debt may be discharged in bankruptcy, and the creditor may repossess the collateral.
Yes, you can rescind the agreement at any time before your discharge or within sixty days after it is filed with the court.
No, a reaffirmation agreement is not the same as a loan modification. It is a commitment to repay a debt in full, while a loan modification changes the terms of the original loan.