What a reaffirmation agreement is
In a typical Chapter 7, your personal obligation on most debts is discharged, which means creditors cannot sue or collect from you personally anymore. A reaffirmation agreement is a new, voluntary contract between you and a creditor where you agree that a particular debt will survive the discharge and you will continue to owe it.
Reaffirmation agreements are most common for secured debts tied to collateral, such as car loans, mortgages, and sometimes furniture or appliance loans. In return for your promise to keep paying, the creditor agrees not to repossess or foreclose as long as you stay current under the reaffirmed terms.
When reaffirmation comes up in Chapter 7
The reaffirmation issue usually arises with property you want to keep, especially vehicles needed for work or essential transportation. Many auto lenders insist on a reaffirmation agreement if you want to keep the car after your discharge, even if you are current on payments.
A reaffirmation agreement has to be signed and filed before your discharge date, typically within about 60 days after the first meeting of creditors, and it must comply with specific Bankruptcy Code disclosure and filing requirements. The agreement may also require a court hearing, especially if you are not represented by an attorney or if the numbers show that the payment will strain your budget.
What happens legally if you reaffirm
When you reaffirm, the debt is treated as if it was never discharged: you remain personally on the hook for the entire reaffirmed balance and any allowed deficiency under state law. If you later default, the creditor can repossess or foreclose on the collateral and still sue you for any remaining balance, plus potentially collect through garnishment or other state‑law remedies.
If you do not reaffirm, your personal liability is discharged, but the lender usually keeps its lien on the collateral. In that case, the creditor can still take back the property if you stop paying, but typically cannot pursue you for any deficiency balance after repossession or foreclosure on that discharged debt.
Potential benefits of signing
Reaffirmation can make sense in some limited situations when it supports your fresh start instead of undermining it. Possible advantages include:
- Keeping essential property: Reaffirming may be the simplest way to keep a car or other necessary asset when the lender requires reaffirmation to avoid repossession.
- Preserving favorable terms: If your interest rate, payment, and balance are reasonable and you are current or can quickly get current, reaffirmation preserves those contract rights going forward.
- Potential credit rebuilding: A reaffirmed loan that remains in good standing can continue to report on your credit, which may help rebuild your credit profile after discharge.
In some cases, debtors can negotiate better terms—such as a lower interest rate or more affordable payment—before agreeing to reaffirm, which can reduce long‑term risk.
Significant risks and downsides
The biggest downside is that reaffirmation gives up one of the core protections of Chapter 7: freedom from personal liability on that debt. If your income drops, the car breaks down, or the collateral depreciates faster than expected and you cannot keep up, you can face:
- Repossession or foreclosure and loss of the property.
- A deficiency balance lawsuit for the remaining debt after the property is sold.
- Collection actions such as judgments, wage garnishment, or bank levies on the reaffirmed balance, depending on Texas and federal law.
Reaffirming debts on property that is not truly necessary—like luxury items or collateral that is worth far less than what you owe—can drag old financial problems into your post‑bankruptcy life and undermine your fresh start.
Should you sign a reaffirmation agreement?
Whether you should sign is a very fact‑specific question, but most consumer bankruptcy practitioners treat reaffirmation as something to approach cautiously, not automatically. Before signing, consider:
- Budget reality: Can you comfortably afford the payment based on your post‑bankruptcy income and necessary expenses, with some room for emergencies?
- Value vs. balance: Is the collateral worth close to what you owe, or are you significantly upside‑down (owing far more than the property is worth)?
- How essential the property is: Is this an asset you truly need, like a reliable car to get to work, or something you could replace more affordably or live without?
- Alternatives: Could you surrender the property and buy or lease a less expensive replacement, redeem the collateral by paying its current value in a lump sum, or look at a different chapter such as Chapter 13 to manage secured debts?
Because reaffirmation agreements are voluntary and often carry long‑term consequences, many courts and legal guides strongly encourage talking with an experienced bankruptcy attorney before signing anything. The attorneys at Leinart Law Firm can review the proposed terms, your budget, and local lender practices in the Texas to help you decide whether reaffirmation supports your fresh start or puts it at risk. For readers in the Dallas–Fort Worth area, a tailored review of your car or mortgage situation, income, and goals can clarify whether reaffirmation is a smart move in your Chapter 7 case or whether another strategy better protects your long‑term financial health.
