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Those seeking debt relief in bankruptcy will often be presented with a reaffirmation agreement. A reaffirmation agreement is an agreement whereby a debtor voluntarily agrees to pay for an otherwise dischargeable debt.

The Bankruptcy Code as revised in 2005 and the Eleventh Circuit Court of appeals even before enactment of the changes in the Code from 2005 held that debtors who possess collateral subject to a security interest must choose to reaffirm the debt, redeem the property or surrender the collateral. In other words, the option in Chapter 7 cases to retain secured property without reaffirmation by continuing payments (installment redemption) is no longer allowed. §362(h) (1) and §521(a) (2) provide that the requirements to file the intention and timely perform it apply to any debt secured by property of the estate and that failure to comply terminates the automatic stay.

Section 521(a)(6) of the bankruptcy code provides that in a chapter 7 case an individual cannot retain the collateral securing a purchase money security interest unless the debtor, within 45 days from the first date set for the meeting of creditors, states their intention to either-

(A) enter into a reaffirmation agreement with respect to the claim secured by the collateral pursuant to Section 524(c); or

(B) redeem such property pursuant to Section 722. Redemption may be accomplished by pay the holder of the lien the fair market value in a lump sum.

If the debtor fails to perform the stated intention during the 45 day period, the automatic stay is not longer applicable to such property. The property is no longer the property of the estate or of the debtor's and the creditor may take whatever action is permitted by the applicable non bankruptcy law, unless the court determines on the motion of the trustee before the expiration of the 45 days, and after notice and hearing, that such property is of consequential value or benefit of the estate, and orders adequate protection of the creditor's interest and therefore, orders the debtor to deliver the collateral in the debtor's possession to the trustee.

Please note that the agreement becomes enforceable 60 days after the agreement is filed or at discharge, whichever is later, unless the debtor gives prior notice of rescission to the other party to the agreement. In other words, the debtor can cancel the reaffirmation within the time as described and as indicated above.

Failure to reaffirm will result in the creditor not sending payment coupons or other invoices, or automatic debits. Furthermore, failure to reaffirm may allow the creditor to repossess (for an automobile, replevin for other personal property) the collateral even if you are current in your payments, provided the contract and state law allows for such relief.

Often times, the value of the collateral is worth much less than what is owed, in other words you are "upside down". In those circumstances, you may not want to reaffirm a debt in which the value of the collateral is substantially less than the amount owed. However, you must always be current and on time with your payments and you risk repossession as discussed above. This option is also known as the "ride through alternative" and creditors may allow you to exercise this option. The benefit of the ride through is that you do not remain personally responsible; if the collateral is repossessed, you are not responsible for the deficiency. The downside is the risk of repossession. Some creditors require reaffirmation agreements as a condition of keeping the collateral. .

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  • "When I first came to the decision to file for bankruptcy, I had no idea where to start. I began researching attorneys on the internet and came across the information for Tim Sierra. Since he specialized in bankruptcy and had a lot of experience......"
  • The process of going through bankruptcy could be very overwhelming but Tim made me feel at ease and I felt that my needs were being taken care of. I truly feel that he had my best interests in mind and the lines of communication were always open....
  • "I had to file a Chapter 7 bankruptcy. I didn't know anyone who could refer someone so I took a chance and just looked on the Internet. I don't remember exactly why I chose Mr. Sierra, but I am glad I did..."
  • He was honest, straightforward, and hard-working. In my case I ended up with some extenuating circumstances and he handled the matter professionally even though I'm sure the work probably exceeded what he originally felt it would be....
  • I don't ever write reviews, and I had no prior relationship with Mr. Sierra. This review is simply being written as a service to others that Mr. Sierra is an excellent attorney and should be considered for your needs if you need one....
  • "I'm very happy to have been referred to Tim for my Chapter 7 filing. He was knowledgeable in his field and very responsive in replying to any questions or concerns I had. Tim was also very accommodating with meeting times..."
  • " I recently was in need of Mr. Sierra's services and I found him to be very understanding and helpful in my particular circumstance. He met with me and explained everything in full detail and also answered every question that I had....."
  • " I recommend Timothy Sierra a loyal and dependable lawyer. When you talk to him you feel that you are with a friend or a member of your family. Timothy is able to lead you in every step of the process. Good job Timothy."
  • " Bankruptcy is a private and personally devastating life event. Timothy Sierra and his assistant, Nancy, made the process as painless as possible. They kept in close contact via phone and email so I always knew what was happening in my case...."
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