Reaffirmation agreements arise in Chapter 7 bankruptcy cases. In a Chapter 7, a debtor must decide what to do with each piece of collateral securing a debt: surrender it, or keep it. If the debtor chooses to keep the collateral, they must reaffirm the debt, meaning they execute a reaffirmation agreement that keeps them personally liable on that obligation even after the bankruptcy discharge.
Why Reaffirmation Matters to the Creditor
Without a reaffirmation agreement, the Chapter 7 discharge eliminates the debtor’s personal liability on the debt. Your lien on the property survives, so you can still foreclose if the debtor stops paying. But if the foreclosure sale does not cover the full outstanding balance, you cannot sue the debtor personally for the deficiency. The discharge has wiped out that personal obligation.
With a valid reaffirmation agreement, the debt continues as if the bankruptcy never happened. The debtor remains personally liable. If they default after the bankruptcy and the collateral is insufficient to cover the debt, you retain both the lien and the personal deficiency claim.
What the Debtor Must Do to Reaffirm
Should the debtor choose to reaffirm, they must execute a reaffirmation agreement prepared by the creditor’s counsel. They must bring the debt current at the time of reaffirmation and keep it current going forward, or be subject to the lifting of the automatic stay as described on the Automatic Stay Relief page.
If a reaffirmation agreement is executed, it must be filed with the bankruptcy court before the debtor receives their discharge in bankruptcy. Once the discharge is entered, a reaffirmation agreement is no longer possible. Timing is critical.
The Debtor’s Right to Rescind
Even after a reaffirmation agreement is signed and filed, the debtor has the right to rescind it, to cancel the reaffirmation, until the time of discharge or within 60 days of filing with the court, whichever provides the debtor with more time. This rescission right is mandatory and must appear in the agreement itself. A creditor who receives a signed reaffirmation agreement does not have certainty of personal liability until the rescission period has passed without cancellation.
When Reaffirmation Is Worth Pursuing
Not every secured debt warrants a reaffirmation agreement. If the collateral clearly covers the full debt and there is no realistic risk of deficiency, the expense of documenting and filing the reaffirmation may not be worth it. If the debtor is genuinely judgment-proof, with no assets and no collectible income, a personal liability claim after a deficiency produces nothing.
We advise clients on this analysis for every Chapter 7 case. Sometimes the answer is to pursue reaffirmation; sometimes the cost outweighs the benefit. The answer depends on the specific numbers and the specific debtor.
We Prepare Reaffirmation Agreements for Creditors
We prepare reaffirmation agreements on behalf of our creditor clients using the official court-required form. We monitor the deadlines in each case to ensure the agreement is properly executed and filed before the discharge is entered, and we track the rescission period to confirm the reaffirmation becomes effective.
In this section: Proof of Claim · Automatic Stay Relief · Reaffirmation Agreements · Plan Negotiation
Frequently Asked Questions
What happens if the debtor reaffirms and then defaults again after the discharge?
The debtor who has reaffirmed is in the same position as any other defaulting borrower, the discharge is not available as a defense because they voluntarily waived it. The creditor can pursue both foreclosure of the lien and a personal deficiency judgment, subject to the applicable time limits.
Can a debtor keep the collateral without formally reaffirming?
In some cases a debtor continues making payments without executing a formal reaffirmation agreement, sometimes called "paying and staying." Whether this informally preserves the debtor's right to keep the collateral is a fact-specific question. As a creditor, you are generally not required to allow a debtor to retain collateral without either a reaffirmation or a formal surrender. We advise on the right approach depending on the specific circumstances.
Is reaffirmation available in Chapter 13?
No. Reaffirmation is specific to Chapter 7 cases. In Chapter 13, secured debts are addressed through the plan itself: the debtor proposes to pay the claim through the plan, maintains ongoing payments, or surrenders the collateral. There is no reaffirmation mechanism in Chapter 13.
What if the bankruptcy court refuses to approve the reaffirmation agreement?
If the debtor is not represented by an attorney on the reaffirmation, the bankruptcy court must hold a hearing to determine whether the agreement is in the debtor's best interest and does not impose an undue hardship. Courts can and do refuse to approve reaffirmations in some circumstances. If the reaffirmation is not approved, the personal liability is discharged, your lien still survives, but the personal claim does not.
How long do we have to prepare and file a reaffirmation agreement?
The reaffirmation agreement must be filed with the bankruptcy court before the debtor's discharge is entered. In a typical Chapter 7 case, the discharge is entered approximately 60 days after the first date set for the meeting of creditors. That is a relatively short window. We move quickly on these when a client brings us a Chapter 7 case where reaffirmation is appropriate.
Does a reaffirmation agreement change the loan terms?
Not necessarily. The reaffirmation typically continues the original loan terms with the same interest rate, same payment schedule, same balance. However, the parties can agree to modify the terms as part of the reaffirmation if both sides agree to the changes. This is sometimes used to restructure a loan on more favorable terms for the debtor in exchange for the creditor receiving the personal reaffirmation.