If you are considering signing a Reaffirmation Agreement, you first need to think long and hard about what you are about to do.
Ask yourself whether or not you can really afford the monthly payment. And don’t rationalize with yourself. Instead, be brutally honest. If you have any doubt as to your ability to make the payments, do not reaffirm the debt.
When you sign a Reaffirmation Agreement and reaffirm a debt, you are preventing that debt from being discharged (forgiven, canceled or wiped out) in your bankruptcy.
As far as a reaffirmed debt is concerned, it’s as if you never filed bankruptcy. You will still owe every penny of that debt and if you become unable to make the payments in the future, that creditor will still have all of their legal rights to collect the debt, including making collection calls, writing collection letters, suing you, garnishing your wages, etc.
And always consider your other options. For example, instead of reaffirming a car loan that you know you can’t afford, think about giving the car back to the creditor. Especially if you are “upside down” in the car and owe more than it is worth. The smart thing to do would be to surrender your current car. Then buy a cheap used car that you can afford and that will get you back and forth until you can afford something nicer.
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I fight this battle with clients on a daily basis, all day, every day (or so it seems.)
I start by telling them that the courts are increasingly anti-reaffirmation. I continue by telling them that reaffirmations are contrary to the whole purpose of a Ch. 7, which of course is to get a fresh start — hitting the “reset button” on their financial problems.
Still yet, people just do not want to give up their car payments … uh … I mean, “CARS”. Always the same conversation:
Me: You really should consider giving the car back after bankruptcy, and saving the payments for a $1000 car.
Client (horrified): WHAT? But I need a DEPENDABLE car.
Me: You can buy a helluva lot of “dependability” for the cost of your monthly car payment.
Client: Are you serious?
And so it goes.