What are reaffirmation agreements?

Once a debt has been discharged in an Ohio bankruptcy, according to the law, the debtor is no longer obligated to pay that debt. In certain cases, however, the debtor may wish to pay the debt anyway, even though it has been legally discharged as a liability. For example, the debtor (which resides in Dayton Ohio) may want to keep a car that was the secured collateral for an auto loan. For that to happen, the debtor can enter into an agreement with the creditor to pay off the debt even though it has been discharged. This is called a reaffirmation agreement.

A reaffirmation agreement is a voluntary agreement reached between two consenting parties, it is not required by bankruptcy law and is not a necessary part of the bankruptcy process. The newly drafted agreement made between the debtor and the creditor is legally binding on both parties and must be approved by the bankruptcy court overseeing the process. The reaffirmation agreement must comply with certain rules and, if the debtor is not represented by an attorney, there will be a hearing to determine whether the agreement satisfied those rules.

By law, the reaffirmation agreement must:

(1) be voluntary;
(2) cannot place an undue financial burden on the debtor or the debtor’s family;
(3) has to be in the debtor’s best interest; and
(4) can be terminated any time before the court orders the discharge of debtor’s debts or within 60 days after the reaffirmation agreement has been filed with the court, whichever is the longest amount of time.

The reaffirmation agreement represents an entirely new and different agreement between the parties and is NOT included in the bankruptcy proceeding. This means that if the debtor fails to pay the debt that is the subject of the reaffirmation agreement, it will not discharged in bankruptcy and the debtor will then owe the creditor under the terms of the newly reached agreement.

Reaffirming a debt is a undoubtedly a serious financial commitment. It is for this reason that the courts require a hearing when debtors are not represented by an attorney. It is advisable, as with any bankruptcy situation, that debtors consult with an attorney before agreeing to reaffirm a debt.

If you are considering filing for bankruptcy and reside in Ohio, call The Law Offices of John T. Nicholson at 1-800-596-1533 for a free consultation today.