by Peter Bricks
One of the most important decisions to make in your Chapter 7 bankruptcy is whether to reaffirm a secured debt, like a car or a mortgage. It is therefore important to note what one must do to legally reaffirm a debt.
At the beginning of the case, the debtor completes a statement of intention, where the debtor declares what he intends to do with his secured debts. This is not binding. It is merely a declaration of what the debtor intends to do.
What ultimately matters is whether the debtor actually reaffirms the debt. The procedure will vary by district, but where I practice in the Northern District of Georgia Bankruptcy Court, a reaffirmation usually does not require the debtor to appear at a special hearing. However, regardless of the district, the debtor will certainly have to sign a reaffirmation agreement.
The signing of a reaffirmation agreement is what binds the debtor to the debt after the bankruptcy. If the debtor does not sign this agreement, the debtor no longer is liable for this debt after the bankruptcy. The debtor might actually still be in possession of the collateral without reaffirming, should the debtor continue to make payments and the creditors continue to accept them. This is one of the advantages of not reaffirming.
The debtor cannot reaffirm or tie himself to the debt after the bankruptcy. This is specifically barred by 11 USC 524. Once the debtor receives his discharge, the creditor can no longer bind the debtor to the debt. This is true even if the debtor modifies a mortgage after the bankruptcy case.
The downside to all this is if the debtor wants to reaffirm, he needs to make sure he gets his hands on a reaffirmation agreement and gets it signed and filed while the case is still pending. The debtor cannot rely on his statement of intention to reaffirm the debt.
Finally, it is important to note that a reaffirmation agreement can be canceled after it is signed, but only for a very small window. The debtor has until the later of his discharge date or 60 days after the reaffirmation agreement is filed.