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What Is A Reaffirmation Agreement?
A reaffirmation agreement is a legally-binding document that establishes the legal obligations of a borrower to repay some or all of it during bankruptcy. Entering into an affirmation agreement is entirely voluntary. However, there are advantages of repaying a debt under a reaffirmation agreement for both the bankruptcy debtor and creditor.
Since state and federal laws apply, ensure that you speak with bankruptcy lawyers for legal advice regardless of your position.
Here is an article about reaffirmation agreements .
Understanding Reaffirmation in Chapter 7 Bankruptcy
When a bankruptcy debtor files for bankruptcy, he or she can seek a reaffirmation during Chapter 7 filings. Instead of allowing the property to be liquidated towards bankruptcy proceeds, the debtor can seek new terms to partially or totally repay the loan amount. If you are seeking approval for a reaffirmation in bankruptcy court, you must seek approval to do so from the bankruptcy judge assigned to your case.
What Happens In A Reaffirmation Hearing?
Reaffirmation hearings occur when a bankruptcy judge must review the agreement to ensure that they are in everyone’s best interest. After filing the reaffirmation agreement with the bankruptcy court, a reaffirmation hearing is scheduled.
For you to receive reaffirmation approval, you must attend it. The consequences of not attending a reaffirmation hearing could result in a denial of your car loan, student loan, forbearance agreement , or mortgage reaffirmations.
These are some elements that a bankruptcy judge may review during a reaffirmation hearing:
- How much your property is worth
- Whether you can afford the mandated monthly payments
- If your income or expenses changed since filing for bankruptcy
- How many payments you have historically missed
- Whether you are current on your payments
Here is an article about understanding reaffirmation in Chapter 7 bankruptcy .
Key Terms In A Reaffirmation Agreement
It is essential to create a reaffirmation agreement that includes all required details. These are the key terms in a reaffirmation agreement:
- Amount being reaffirmed
- Annual percentage rate (APR)
- Debtor’s statements in support of reaffirmation
- Certification of both parties
- Disclosures and statements
Some of these key terms are more advanced than others. Your reaffirmation agreement’s scope and dept depend upon the asset in question and your specific financial situation. You can better anticipate what to expect by understanding how reaffirmation agreements work.
How Reaffirmation Agreements Work
Reaffirmation agreements are filed with the U.S. bankruptcy court to demonstrate a written acknowledgment of new debt. These contracts are typically written by bankruptcy lawyers for the creditor. The terms and conditions contained within affirmation agreements are subject to court approval.
Here is an article about how reaffirmation agreements work .
Reaffirmation for Borrowers
Borrowers should think carefully about signing a reaffirmation agreement. There are significant advantages and disadvantages of signing one. However, they are also opportunities to retain your assets while negotiating a lower payment or interest rate.
The most significant disadvantage of reaffirmation agreements for debtors is that they cannot default on the loan in the future. Repaying the debt is required for you to successfully exit Chapter 7 bankruptcy proceedings. If you do not pay the loan, then the creditor can repossess your property.
It is essential to only enter into reaffirmation agreements if you are reasonably confident that you can pay the debt off. Another way that bankruptcy lawyers look it is by asking clients if they can replace the item for less than what they currently owe.
Reaffirmation for Lenders
Reaffirmation agreements can help a lender recuperate payments from a debtor. Doing so helps them avoid the liquidation or auction process, which can be much cheaper for the creditor in the long run. However, reaffirmation agreements are prime for pitfalls and traps without sound legal advice from creditor-side bankruptcy lawyers.
Getting a reaffirmation is a time-sensitive process and subject to court approval. Preliminary negotiations can lead to delays in bankruptcy proceedings. If obtaining money on a defaulted asset is of concern to you, you must establish a reasonable reaffirmation agreement and consider all applicable laws.
Example of Reaffirmation
If you need an example of a reaffirmation, you can perform a Google search to locate a boilerplate template for the agreement. However, these documents are not customized for your situation, which you should carefully consider before signing one. Always speak with bankruptcy lawyers to help you make a decision.
Here is an example of a reaffirmation agreement .
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Purpose Of A Reaffirmation Agreement
The purpose of a bankruptcy reaffirmation agreement is to protect all parties with a financial and legal interest in the Chapter 7 bankruptcy proceedings. It establishes the terms and conditions of reaffirming an asset and can be negotiated to benefit both the creditor and debtor.
Who Signs A Reaffirmation Agreement?
The individuals who sign a reaffirmation agreement include:
- Joint debtor
- Debtor’s attorney
After signing a reaffirmation agreement, then all parties acknowledge the terms set forth. However, the court must approve the agreement before it becomes finalized.
What Happens If You Don’t Sign A Reaffirmation Agreement?
If you don’t sign a reaffirmation agreement, then you may stand to lose the non-exemptible portion of the asset. As such, the asset, such as a car or furniture, could be liquidated as part of your Chapter 7 bankruptcy proceedings. However, signing a reaffirmation agreement ensures that it stays out of the matter.
Can You Negotiate A Reaffirmation Agreement?
Yes, you can negotiate a reaffirmation agreement. Since your bankruptcy is contingent upon your financial situation, hire bankruptcy lawyers to negotiate the terms and conditions. Creditors are interested in getting paid, which means that you have a chance to negotiate with them.
You can negotiate the following assets in a reaffirmation agreement:
- Motor vehicles
- And more
When negotiating reaffirmations, it is imperative to convince the creditor to lower your interest rate, loan balance, or both. The creditor may counter with a different offer. However, the most essential element to remember is that the terms are open for negotiation.
Getting Help With A Reaffirmation Agreement
Regardless of your role in the bankruptcy, getting help with a reaffirmation agreement starts by hiring bankruptcy lawyers. They will help you deal with the legal and financial issues associated with reaffirmation agreements. Bankruptcy lawyers will also help you with negotiating and filing the document as well.
These are the ways that bankruptcy lawyers help with reaffirmation agreements:
- Offering legal options for bankruptcy to debtors or preparing creditors
- Drafting the reaffirmation agreement while complying with federal and state laws
- Appearing in bankruptcy court during the meeting of the creditors
- Addressing remaining legal and financial issues experienced by creditors and debtors
- Guiding the parties through bankruptcy toward a successful exit
Simply put, bankruptcy lawyers help you make the bankruptcy process more manageable, whether you are the creditor or debtor. They hold your legal and financial interests in mind at every critical point of the proceedings.
Without solid legal advice, you could make legal mistakes that negatively impact your financial health. Avoid this problem altogether by hiring bankruptcy lawyers to help you with a reaffirmation agreement.
Need Help with a Reaffirmation Agreement?
If you need help with a reaffirmation agreement, speak with bankruptcy lawyers today. Consider posting your project to ContractsCounsel at no cost.
Meet some of our Reaffirmation Agreement Lawyers
David H. Charlip, the principal of Charlip Law Group, LC, is one of only 101 Board Certified Civil Trial Lawyers in Miami-Dade, with over 38 years of litigation experience. Mr. Charlip is also one of only 136 Florida Civil Law Notaries. He has managed and litigated cases across the country. Mr. Charlip has advised businesses, drafted business formation and purchase and sale documents and litigated business disputes for over 30 years and is very familiar with all aspects of contractual relations.
With over 16 years of experience in the area of estate planning, trademarks, copyrights and contracts, I am currently licensed in Florida and NJ. My expertise includes: counseling clients on intellectual property availability, use and registration; oversee all procedural details of registration and responses with the USPTO/US Copyright Office; negotiate, draft and review corporate contracts and licensing; counsel clients on personal protection, planning and drafting comprehensive estate plans.
Melissa Taylor, the President and founding partner of Maurer Taylor Law, specializes in business contract review and drafting and is a second-generation attorney with private firm, in-house counsel, governmental, entrepreneurial, and solo practitioner experience. Melissa has a strong legal background, a dedication to customer service, is friendly, warm and communicative, and is particularly skilled at explaining complex legal matters in a way that's easy to understand. Melissa personally handles all client matters from start to finish to ensure client satisfaction.
Lawrence A. “Larry” Saichek is an AV rated attorney and a CPA focusing on business and real estate transactions, corporate law and alternative dispute resolution. With a background including five years of public accounting and six years as “in house” counsel to a national real estate investment company, Larry brings a unique perspective to his clients – as attorney, accountant and businessman. Many clients think of Larry as their outside “in house” counsel and a valued member of their team. Larry is also a Florida Supreme Court Certified Mediator and a qualified arbitrator with over 25 years of ADR experience.
Entertainment Attorney with 30+ years of experience, representing all aspects of the TV, Film, Music and Publishing Industries
Aaron focuses his practice on startups and emerging growth companies, providing general counsel services for companies from formation through exit. Aaron frequently advises clients in connection with routine and unique legal, business, and strategic decisions, including corporate, business and technology transactions, angel and venture financings, mergers and acquisitions, protection of intellectual property, and information privacy and data security.
I enjoy helping businesses of all sizes succeed, from start-ups to existing small and medium sized businesses. I regularly advise corporate clients on a variety of legal issues including formation, day to day governance, reviewing and drafting business contracts and other agreements, business acquisitions and sales, as well as commercial and residential real estate issues, including sales, purchases and leases. As an attorney licensed in both Michigan and Florida, I also advise clients on real estate issues affecting businesses and individuals owning real property in either state, whether commercial, residential or vacation/investment property. I also regularly assist nonprofit organizations in obtaining and maintaining tax exempt status, and provide general legal counsel on all matters affecting public charities, private foundations and other nonprofit organizations.