Chapter 7 Success Lawyers Chicago - Reaffirming a debt in a Chapter 7 Bankruptcy case

Reaffirming a debt in a Chapter 7 Bankruptcy case

Reaffirming a debt is simply agreeing to repay a particular debt through a bankruptcy case. The terms may or may not be identical to what they were prior to filing. For example, with a furniture purchase, the creditor will likely accept less the full amount owed on the purchase. The same is not true for jewelry purchases or real estate. When it comes to auto purchases, some creditors are willing to negotiate a lesser balance amount while others hold firm to the full amount owed.

The typical reaffirmation agreement is offered by the creditor, executed by the debtor, his counsel, and the creditor’s representative and filed with the Clerk of the US Bankruptcy Court. The court will then determine whether or not the reaffirmation agreement imposes and undue hardship on the part of the debtor. If the court determines that an undue hardship exists, it can hold a hearing to either approve or disapprove the reaffirmation agreement. If approved, the case discharges and the right to rescind expires, the debtor is effectively on the hook for that debt. The debtor may have received a discharge, however, with respect to the reaffirmed debt, the obligation to pay remains just as if a Chapter 7 Bankruptcy case had not been filed.

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