What is Reaffirmation Agreement Drafting?
A reaffirmation agreement is a legal contract between a creditor and a debtor in a Chapter 7 bankruptcy case. It specifies that a debtor commits to repaying all or a portion of a debt that would be discharged through bankruptcy.
It’s common for debtors to use a reaffirmation agreement for secured debts so that they can maintain the collateral and not risk foreclosure or repossession.
Read the rest of this article for key components to include in a reaffirmation agreement, how to draft it, and how a lawyer can help you with the process.
What are Core Components in a Reaffirmation Agreement?
A reaffirmation agreement usually contains key terms, such as the following:
- Voluntary nature. The agreement must be voluntary for the debtor. This must be made clear.
- Continuation of original terms. The debtor must agree to pay the debt according to the original or adjusted loan terms.
- Retention of collateral. The creditor promises not to foreclose on or repossess the property as long as the debtor sticks to the repayment schedule.
- Filing. The agreement must follow some formalities, such as being signed, executed, and filed with the bankruptcy court. This should occur before the bankruptcy discharge is granted.
- Right to rescind. This states that the debtor can cancel the agreement before the discharge order is entered or within 60 days of filing the agreement with the court, whichever occurs later.
- Dispute resolution. Explain what dispute-resolution method parties will use to resolve their disagreements, such as mediation or arbitration.
What are Drafting Tips for a Reaffirmation Agreement?
When drafting a reaffirmation agreement, it’s important to focus on specifying the obligation that’s being reaffirmed and confirming both parties’ intentions. Here are some tips to bear in mind.
Refer to the Original Document
It’s important to refer to the original loan or debt obligation. Check its date, reference number, relevant terms, and the parties involved in the agreement. This will prevent you from writing contradictory details in your reaffirmation agreement.
You can include relevant schedules and repayment plays to support your reaffirmation agreement, if required.
State the Document Purpose
It’s useful to explain why the parties are reaffirming the existing obligation. You can do this by thinking about what they are confirming and why to provide parties with clarity.
Clarify all Obligations
Describe all liabilities and payment obligations, as well as any contractual commitments that remain in effect. Use clear, specific wording and avoid anything vague that could create confusion over obligations.
Verify Payment Terms
Include the principal amount and accrued interest. You should also explain how future interest and charges are going to be calculated to prevent hidden or surprise financial obligations.
Confirm Collateral and Guarantees
If relevant to your agreement, you should identify any collateral that secures the debt and explain how the reaffirmation agreement will affect existing security interests. If guarantees are included, explain their status under the relevant agreements and laws.
Should You Hire a Lawyer for Reaffirmation Agreement Drafting?
Hiring a lawyer to draft your reaffirmation agreement is a good idea, especially if your financial obligations are significant or you’re concerned about anything in the arrangement.
A lawyer will assist you during the contract drafting process by:
- Reviewing the original document. A lawyer will closely examine all documents so that they can see which terms must be reaffirmed.
- Clarifying the purpose of the reaffirmation. They’ll clearly establish why the parties want to reaffirm the obligation.
- Examining financial obligations. They’ll check the outstanding balance, interest, fees, and other charges, while aligning all payments with a repayment schedule.
- Assessing your legal risks. They’ll identify potential consequences and enforcement risks so nothing is left uncertain.
- Aligning the agreement with laws. They’ll check the agreement terms against all relevant laws, approvals, and formalities to ensure legal compliance.
- Helping you with implementation. A lawyer will explain how the agreement should be executed and delivered as well as what filing requirements apply.
- Reviewing a contract you’ve drafted. A lawyer will be able to conduct a thorough review of your reaffirmation agreement, giving you peace of mind that it protects your interests.
Where to Find and Hire a Lawyer for Reaffirmation Agreement Drafting
If you need to hire a lawyer to draft your reaffirmation agreement for you, you don’t have to call traditional law firms in your area. Instead, you can use an online legal marketplace that gives you access to a range of lawyers who have the experience and skills to help you.
ContractsCounsel is one of the largest online legal marketplaces that enables you to connect to a curated network of lawyers who have been vetted on the platform.
To ask a lawyer on the platform to draft your reaffirmation agreement, here are the steps to follow:
- Go to the ContractsCounsel marketplace.
- Select ‘One-time project’ and ‘Create or update contract.’ If you’d prefer to ask a lawyer to review your reaffirmation agreement, you should select ‘Review contract.’
- Post your project for free. Include some details of what you need so you can match with suitable lawyers.
- Wait for bids. After posting your project, you’ll connect with lawyers who will send you bids to work on your project. This prevents you from having to find lawyers to hire.
- Review the platform’s lawyer data. This includes the lawyers’ location, years of experience, client ratings for previous projects completed on the platform, credentials, and field of expertise.
- Select a lawyer to hire. They’ll draft or review your reaffirmation agreement for a flat fee.
