In some situations, a debt can be discharged through a bankruptcy, but a debtor may wish to pay that particular debt. The most common example is a vehicle. Bankruptcy does not prevent a debtor from voluntarily paying a debt that would otherwise be dischargeable. The lender is protected by the security interest attached to the collateral and if the debtor cannot repay the debt, the lender may possess the right to take away the collateral. A reaffirmed debt is treated as if the debtor never filed for bankruptcy.
People need vehicles, it is a fact of life. However, a debtor should not enter into a reaffirmation agreement to retain property if he or she can get adequate replacement property for less money. Vehicle payments can be an integral part of a bankruptcy, especially if there are alternate options that will not create more financial stress upon the debtor
Congress has even expressed concern that at times the debtor may be taken advantage of when they’ve signed the reaffirmation agreements but cannot make the payments anymore. Unless explicitly required to do so, we advise our clients to not sign reaffirmation agreements because the future of the collateral can be uncertain and we do not want the clients to be plagued by debt once again. Keep in mind, there may be certain situations in which a reaffirmation agreement could make sense (or is required) but we strongly advise you to speak with your attorney before signing anything. If you have already signed a reaffirmation agreement, you have 60-days to revoke it without penalty.
Given the possibility for significant financial consequences, there may be ways to renegotiate payments with creditors instead of committing to a reaffirmation agreement. But what about my credit score? There are many ways to improve your credit score, but signing a reaffirmation agreement is not the route to choose.
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