A reaffirmation agreement is a type of relief agreement that allows you to keep your property even after discharge of your debts in bankruptcy. However, under a reaffirmation agreement you still agree to be liable for the debt owed on the property you wish to keep. You can think of it as a new contract, signed by and your lender, in which you are “reaffirming” that you are still liable for the debt.
For instance, you have defaulted on your car and jet ski payments and your creditors are ready to repossess both vehicles. You proceed to file for bankruptcy, but you wish to keep the car because it is your only reliable source of transportation. At this point you decide to sign a reaffirmation agreement with your car creditor which will allow you to keep the car as long as you promise to pay for the remaining debt by the new terms of the agreement.
On the other hand, since you have surrendered your jet ski, it will be repossessed and sold at market value. The money made on the jet ski goes to the creditor, and whatever you still owe on the jet ski will be discharged through bankruptcy relief.
However, you can also sign a reaffirmation agreement if you wish to keep the jet ski as well. But before signing any new agreement you may want to seek a bankruptcy attorney to go over the terms of the new contract or to inquire whether a reaffirmation agreement would be a practical option.
Trezza & Associates — Tucson Bankruptcy