LAWDOG BANKRUPTCY: CHAPTER 7

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Agreement Prior To Discharge

A reaffirmation is a voluntary agreement, between a debtor and a creditor, that the debtor will pay all or a portion of an otherwise dischargeable debt after the debtor has filed bankruptcy. The creditor may promise that the creditor will not repossess an automobile or other property, provided that the debtor makes scheduled payments. The reaffirmation agreement must be enforceable under applicable nonbankruptcy law, and must be made prior to the granting of a discharge.

The reaffirmation agreement must contain a clear and conspicuous statement that advises the debtor that the agreement is not required by bankruptcy or non-bankruptcy law, and that the agreement may be rescinded by giving notice of rescission to the holder of such claim at any time prior to discharge or within sixty days after the agreement is filed with the Court, whichever is later. See Section 524 (c) of the Bankruptcy Code, reproduced here for illustration purposes only.

Agreement Must Be Filed With Court

A written agreement to reaffirm a debt must be filed with the Bankruptcy Court. The attorney for the debtor must file an affidavit certifying that the agreement represents a fully informed and voluntary agreement, that the agreement does not impose an undue hardship on the debtor or a dependent of the debtor, and that the attorney has fully advised the debtor of the legal consequences of the agreement and of a default under the agreement.

Where the debtor is an individual who was not represented by an attorney during the course of negotiating the agreement, the reaffirmation agreement must be approved by the Court, after disclosures to the debtor, and after the Court finds that it is in the best interest of the debtor, and does not cause an undue hardship on the debtor or a dependent. The debtor must also not have rescinded such agreement at any time prior to discharge or within sixty days after such agreement is filed with the court, whichever occurs later, by giving notice of rescission to the holder of such claim. See Section 524 (d) of the Bankruptcy Code, reproduced here for illustration purposes only.

A reaffirmation agreement is required to be a voluntary contract. Accordingly, a secured creditor is generally not required to agree to a proposed reaffirmation by the debtor. The automatic stay provisions prohibit creditors from coercing a debtor to reaffirm any pre-petition debt. Under Section 524 (f), the debtor may repay any debt voluntarily whether or not a reaffirmation agreement exists. See Section 524 (c) of the Bankruptcy Code, reproduced here for illustration purposes only. Actual cases should be discussed with your actual legal advisor or legal department.

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