Reaffirmation of Debt in Bankruptcy
By Michael C. Dennis, MBA, CBF

A reaffirmation is a voluntary agreement, between a debtor and a creditor that the debtor will pay all or a portion of an otherwise dischargeable debt after the debtor has filed bankruptcy. To be valid, the debtor must fully understand the fact that it would be entitled to discharge of this indebtedness when and if a discharge is granted in the bankruptcy proceedings, but wishes to repay the debt in return for additional consideration offered by a creditor. Creditors should be aware that:

• A written agreement to reaffirm a debt must be filed with the Bankruptcy Court, and reaffirmation agreements are subject to court approval.

• The reaffirmation agreement must contain a clear and conspicuous statement that advises the debtor that the agreement is not required under U.S. bankruptcy law.

• A reaffirmation agreement is required to be a voluntary contract. The automatic stay provisions prohibit creditors from coercing a debtor to reaffirm any pre-petition debt.

• The reaffirmation agreement must be signed prior to discharge of the bankruptcy in order to be enforceable.

• The debtor must be notified that the agreement may be rescinded by giving notice to the creditor any time prior to the bankruptcy discharge, or within sixty days after the agreement is filed with the Court, whichever is later.

• The attorney for the debtor must file an affidavit certifying that the agreement represents a fully informed and voluntary agreement. [If an attorney does not represent the debtor, the Court must approve the reaffirmation agreement after proper disclosures to the debtor, and only if the Court finds that reaffirmation is in the best interest of the debtor].

• Form B240 is the Reaffirmation Agreement that creditors can present to debtors in a bankruptcy case.

One final comment: The information provided above provides an overview of one part of the U.S. Bankruptcy Code. It is not a substitute for professional legal advice. If you have questions or need further information as to how the bankruptcy laws apply to a specific situation, you should consult with your lawyer.