Yes. You can back out of any Reaffirmation Agreement you have signed if you act quickly enough.
The proper bankruptcy terminology for canceling a Reaffirmation Agreement is “rescission.”
Bankruptcy law provides that a debtor may rescind a Reaffirmation Agreement at any time prior to receiving a discharge or within sixty days after the agreement is filed with the bankruptcy court, whichever occurs later.
If you have changed your mind regarding a Reaffirmation Agreement you have signed, all you need to do is notify the creditor in writing that you wish to cancel the Reaffirmation Agreement. This is usually referred to as a Notice of Rescission. In notifying the creditor of your desire to cancel the agreement, you do not have to give any reason for your change of mind.
And once you have provided written notice of rescission, the creditor must return any payments you made while the Reaffirmation Agreement was in force.
{ 15 comments… read them below or add one }
Mr Nunley, I read in one of your articles on Reaffirmation Agreements that the creditor has the right to come after you. Can you give up the property as well if you fall behind in a debt and can no longer keep up with the debt? I’ve already filed Bankruptcy and decided to keep the house, but now am having second thoughts because of repairs that are very costly. Can I just give it up. Here in Florida I don’t know to much about the laws on bankruptcy.
Marsha,
Reaffirmation agreements cannot be required for real property so it is rarely in a person’s best interest to reaffirm debt associated with real property. One of the benefits of not reaffirming a home loan is that you maintain the option to walk away from the house in the future should you become unable to continue to make the mortgage payment or decide that you no longer want to continue to make the mortgage payment. However, if you have reaffirmed the debt, you have committed yourself to making that mortgage payment and if you don’t, the mortgage company has the legal right to foreclose and pursue a deficiency if state law so allows. Since I am licensed to practice law only in Oklahoma, I would suggest that you contact a knowledgeable bankruptcy attorney near you for advice related to your specific situation. I wish you well.
Dan Nunley
Mr. Nunley,
I live in California, though I have a loan on a home in Oklahoma. My husband, who I’ve been (not legally) separated from, is living in the home and making the payments (he’s on the deed but I’m the only one responsible for the loan). I’m ready to file a Chapter 7 bankruptcy. I’ve been wondering about reaffirming the mortgage and it seems from your posting that I don’t need to. Also, would there be any benefit for either one of us if I were to quitclaim the property to him? Thanks in advance for your response.
Vivian,
You are correct in that there is no requirement under the bankruptcy code to reaffirm a debt secured by real property. And if you don’t reaffirm, then your liability will be discharged and you won’t owe another penny on the Oklahoma house. However, the mortgage company would still have secured interest in the real property. Since your husband is not currently on the note, the mortgage company would most likely file a Motion for Relief in order to protect it’s interest in the real property. To avoid this, your husband might want to be added to the current note or refinance the loan in his name.
Another issue arises if there is equity in the property. I am licensed to practice law only in Oklahoma, and therefore would suggest that you discuss this matter with a California attorney. Since the Oklahoma house is not your homestead, if there is equity in the property, you need to see if you would be able to protect that equity by using available California exemptions. If not, a Chapter 7 trustee could move to take your share of the equity in the property which could have negative an unintended consequences for your husband.
Dan Nunley
I have a leased 2007 car. I extended my lease in Dec 2010 through May 2011. There is $10,184 left on my car and I owe March and April payments of $265/month. I have my 341 meeting for Chapter 7 on March 9, 2011 and have chosen to reaffirm my lease and the reaffirmation agreement should be filed shortly. My parents said they may help me come up with the money to pay my lease off, they’ll let me know at the end of April (I have to pay my lease off or turn it in in May). If my parents decide not to help, can I rescind my reaffirmation without liability to the debt?
I just filed a Recission of Reaffirmation Agreement on a car loan that I thought I could somehow pay but after several months could not afford the car anymore. I was in the time period and it was filed and now I am just trying to find out what happens to the car now?
Karen
James,
Since I am licensed to practice law only in Oklahoma and you are a resident of Kansas, I cannot give you legal advice. However, I will say that if a person filed Chapter 7 bankruptcy in 2009, the only income tax refunds that could be assets of the bankruptcy estate would be refunds for 2009 and earlier years. Therefore, the case trustee would not be entitled to administer any income tax refunds for 2010 and subsequent years.
Dan Nunley
Stephanie,
A reaffirmation agreement may be rescinded at any time prior to either the discharge being entered or 60 days from the date the reaffirmation agreement was filed, whichever date is later in time. See my blog post on rescission of reaffirmation agreements for more information.
Dan Nunley
Karen,
I would suggest that you contact the car finance company and arrange for the turn over of the vehicle whether they pick it up or you drop it off.
Dan Nunley
Hi Dan:
I have a real situation going on here. My husband has not been able to make the money he had been making in previous years. Therefore I am now the bread winner in the family. With that said, our bills are very very far behind. We are looking in to filing Chapter 13 Bankruptcy, but I am afraid that they will take all of my income and nothing from him because he doesn’t make that much. I am very frustrated with this situation due to the fact that most of the debt is his and I am the one that has the income to exhaust. Any advice for someone in my situation?
What if you need to file a letter of recission and it is outside of the Discharge and 60 days?
Marie,
The recission must occur either prior to the discharge being entered or within 60 days from the date the reaffirmation agreement was filed whichever is later in time. Based on what you describe, it is too late to rescind the reaffirmation agreement.
Dan Nunley
Karen,
In a Chapter 13 bankruptcy, regardless of whether an individual or joint case is filed, the plan payment is set based on household income so your husband’s income would be part of the plan. The plan payment could be deducted from one or both of your paychecks based on your desires.
Dan Nunley
Hello,
I had my creditors meeting on May 24, on that day I signed a reaffirmation on my auto loan. I was notified a few days ago that my car payments are not being reported to the credit bureau which I’m not happy about. Can I change my mind about the reaffirmation? Would this show on my credit report as a repo? I’m thinking about letting the car go back since I’m so upside down and would have hard time trying to trade it in for a new car.
Thank You
Teresa,
You can rescind the Reaffirmation Agreement within 60 days of its filing or until the court issues your discharge, whichever occurs later. Obviously it’s been over 60 days since your Reaffirmation Agreement was filed so the only way you can rescind now is if your discharge has not yet been issued. If your discharge has been issued, you’re out of luck. Here’s a recent blog post that I wrote about this issue: http://www.oklahoma-bankruptcy-attorney.com/reaffirmation-agreements/if-i-reaffirm-a-debt-and-then-change-my-mind-can-the-reaffirmation-agreement-be-cancelled/
Dan Nunley