Most people when filing bankruptcy have some debt secured by assets that they would like to keep. For instance, they might have a house with a mortgage or a car with a car payment. In these circumstances (assuming there is a bankruptcy exemption to cover the assets, which there normally is) the chapter 7 filer can elect to give up and asset and discharge the debt or keep the asset and reaffirm the debt.
Reaffirmation describes the process by which a person going through bankruptcy contracts to maintain the debt obligation on an asset her or she would like to keep. To reaffirm a debt, there is a specialized form that must be filled out and filed with the bankruptcy court. Without such form(reaffirmation agreement), the bankruptcy code essentially provides that all dischargeable debt is discharged in the bankruptcy. However, the code does not state who is responsible for drafting and entering the reaffirmation agreement. Generally the creditor takes on this responsibility, since they have a great incentive to have it entered.
Many times I have clients who want to affirm debts even though they are not secured by any asset. They might want to reaffirm a signature loan because it is co-signed by a family member. This is a matter that takes great consideration. Or, they might want to credit card so they could “keep” it. This trick does not work ; therefore, it does not make sense to reaffirm under this circumstance.
Filing bankruptcy now days is nearly impossible without the assistance of an Oklahoma bankruptcy attorney and the reaffirmation process is one of the reasons for that. The Bankruptcy Act is quite vague when it comes to reaffirmation agreements. Who provides the agreement? Who files it? How are they enforced? What if one party wants one and the other does not? What if one party has a policy not to do them? The code does not have the answers.
When should a debtor file a reaffirmation agreement? Many times filing a reaffirmation agreement is a catch 22. By filing one you are essentially making a dischargeable debt in to a non-dischargeable debt. In essence, the debt survives the bankruptcy and, if reaffirmation is not rescinded within 60 days of it being filed, it is as if you had never filed as to that debt.
I, as a Oklahoma City bankruptcy lawyer, am initially hesitant for a client to reaffirming, because it is puts them outside of the bounds of the protections of the bankruptcy for that debt. On top of that, there is a possibility that the creditor would allow the debtor to simply continue on without a reaffirmation agreement. With these creditors, so long as the payments are made, the creditor will continue to accept them. On the other hand, there are also creditors that put a clause in their contract that filing bankruptcy a form of default. If they do that, then they have the right to repossess/foreclose even if you remain current, if there is not a reaffirmation agreement in place. So each case is different.
If you are considering an Oklahoma chapter 7 bankruptcy, you are going to have to consider reaffirmation agreements and whether to file any. You have to make the decision and there is a time limit to your ability to file one. With reaffirmation, there is no simple generalized answer to the questions of, “do we do one or not.” It is important to consult with your bankruptcy attorney on your specific circumstances, but I have heard of some Oklahoma bankruptcy lawyers who simply will not participate in reaffirmation agreements. So, if you are considering bankruptcy in Oklahoma, you should contact me at (405) 563-7888, and I can walk you through your reaffirmation options.