If a debtor is filing Chapter 7 bankruptcy and wants to keep property that has a loan attached to it, they may want to consider a reaffirmation agreement. However, there are a lot of things about reaffirmation agreements that debtor's either don't know or don't understand. And because reaffirmation agreements are binding after the bankruptcy discharge, this truly is a case of where lack of knowledge can hurt you.
Let's Take a Look at a Few of the Facts:
The Bankruptcy Trustee Is On Your Side
While generally speaking, the bankruptcy trustee is there to make sure that creditors get paid and get paid as much as possible, when it comes to reaffirmation agreements, the trustee is really on your side. The bankruptcy trustee is responsible for making sure that the debtor does not sign any agreement which can jeopardize his/her fresh start. And because reaffirmation agreements are legally binding contracts which oblige a debtor to pay debts which would be otherwise discharged in bankruptcy, the trustee is reluctant to approve reaffirmation agreements if he/she believes the debtor can't afford it.
Because reaffirmation agreements can become toxic to a bankruptcy debtor's fresh start, there is a 60 day window to change your mind. If a bankruptcy debtor regrets signing a reaffirmation agreement for whatever reason and wants out, they can do so within 60 days of signing the agreement.
Your Bankruptcy Attorney At Risk
Because a bankruptcy attorney is required to sign a sworn statement declaring that a reaffirmation agreement was entered into voluntarily and that it does not cause an undue hardship to the debtor, attorneys carefully review these types of agreements before agreeing that they're okay for a debtor.