Tag Archive: reaffirmation


“Reaffirmation” is one of those words that is used quite frequently in the bankruptcy context, though often the debtor filing for bankruptcy protection does not fully understand the implications of a Reaffirmation, and in my humble opinion, that is not good enough.

When you sign a reaffirmation agreement, you – as the debtor in the case – agree that one of your debts does NOT get discharged by virtue of your bankruptcy.  Basically, you will still be on the hook for the full amount owed, even after your bankruptcy has been concluded, and if you default on your payments, the bank has every right to sue you, or make any other (legal) effort to collect the debt from you.

Why, you ask, would anyone want to do THAT…. especially since the point of every bankruptcy is a “fresh start” – to be debt free again.  The most common debts that get reaffirmed are those debts that are secured by a vehicle.  In the 9th Circuit (the federal Circuit in which Arizona is located), a debtor cannot keep a vehicle that he or she owes money on if the debt is not reaffirmed.  So, essentially, the choice becomes ‘keep your car and reaffirm the debt’ or surrender the vehicle.

Now, of course, you may think, “no brainer – I need my car – therefore I will reaffirm my debt.”  While this is often the initial reaction, it is not a good idea just to jump into a reaffirmation, simply because you think you need YOUR car. 

Here are some additional considerations to keep in mind:

  1. Is the car worth more than what you owe on the loan?
  2. Can you realistically afford your monthly payments?
  3. There are no other alternatives.

If the answer is “no” to any of these questions, then you really need to put some thought into the decision to reaffirm your debt.  Reaffirming a debt has serious consequences.  With a little planning, and some good counsel by your attorney, you would be surprised how many alternatives you have, without getting stuck with a huge car loan in the long run.

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The above statement, or some variation thereof, is something that as a bankruptcy attorney I hear a lot.  And it is not really a surprise – a lot of people today find that they have a particular problem with one thing (think mortgage), but are really ok as far as everything else is concerned.  Of course, every now and then the variation on this statement goes something like “I shop at Kohl’s a lot, so I don’t want to include them in the bankruptcy, just all of the other stuff”. 

The misconception lays in the word ‘include’.  It is really not an appropriate word to use in the context of bankruptcy.  When you file for bankruptcy relief ALL OF YOUR DEBTS must be listed.  No ifs, ands or buts about it.  Just like all of your assets must be listed.  So in the sense of listing your creditors, and notifying them of your filing, everything must be ‘included.’   

Here is where it gets complicated, though.  Just because a debt is ‘included’ in the sense that it was listed on your petition, does not necessarily mean the debt will be discharged.  For example, student loans and certain tax debts are not dischargeable.  They have to be listed, and for all intents and purposes they are ‘included’…..BUT, they are not included in the debts that are discharged.  Other debts that are ‘included’ but not discharged, are those debts that you reaffirm during your bankruptcy, so you can keep the collateral (usually for a car). 

Now, if you have a credit card that has a zero balance, you do not own a debt to that particular creditor and it does not have to be listed on your petition.  It is NOT  good idea, however, to pay off that Kohl’s card so you don’t have to list it, because eventually Kohls – or whoever – will discover that you filed for bankruptcy relief, and even though you did not owe them any money at the time of your filing, they will likely either raise your APR, lower your balance, or shut down your card altogether. 

In short, EVERYTHING is included in your bankruptcy in one way or another.  Talk to your attorney to make sure you understand what this means for you.