Are Reaffirmation Agreements Always Approved?

By Larry Hercules | Published on August 29, 2011 | 0 Comments

A reaffirmation agreement is a document that a bankruptcy filer can submit when he or she wants to continue to be liable to a secured creditor even after his case has been discharged. As Plano bankruptcy attorney Larry K. Hercules explains, reaffirmation agreements are most commonly signed by people who want to go through bankruptcy without losing their houses or cars.

Of course, reaffirmation agreements can apply to virtually any type of secured debt – not just houses and cars. A person who is buying lots of TVs, computers, or even washing machines in Plano could ask his bankruptcy attorney to file a reaffirmation agreement to prevent having to give those appliances back in a Chapter 7 bankruptcy case.

By signing a reaffirmation agreement, a debtor is reaffirming his intention to continue paying for whatever asset the agreement protects by accepting liability for the monthly payments. If the person misses a payment in the future, then the asset can still be taken away just as it would have before the bankruptcy process began. Hercules is careful to point out that people cannot keep assets that they do not intend to pay for, whether they file for bankruptcy or not.

Before a debt can be reaffirmed, the debtor is required by law to file a budget with the court. This budget will show how much money the person is earning each month, and how much he has to spend on the bare necessities like food, utilities, and medical insurance. If a person does not have adequate money left over in his budget after subtracting the mortgage and bare necessities, then a judge is unlikely to approve the reaffirmation agreement.

Hercules, who is a bankruptcy attorney in Plano, says that judges in these cases act as big brothers or big sisters, and they help protect people from taking on more debts than they can logically afford. If a person is upside down in his monthly cash flow, then a judge will usually step in to try and protect the person by refusing to reinstate his liabilities to certain secured creditors. The downside to this is that the person will not be able to keep the assets he was trying to reaffirm, however  the person would not have been able to afford those assets anyway.

The Plano bankruptcy attorney says that by requiring that reaffirmation agreements be approved by the court before they can be filed, judges are helping to protect debtors from getting into more trouble by taking on more debt than they can realistically manage.

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*Disclaimer: This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.

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