Questions and Answers
Why am I in court today?
Although you have signed a reaffirmation agreement with one of your creditors, the bankruptcy judge must approve the terms of the reaffirmation agreement before it becomes effective. Before approving the agreement, the judge must decide two things: (1) that reaffirming this debt will not place an undue hardship on you (that is, if your monthly income less your monthly expenses leaves enough leftover money to pay this debt); and (2) that reaffirming this debt is in your best interest.
What is the effect of the reaffirmation agreement?
If the judge approves your reaffirmation agreement, it means that you will remain personally liable for the debt and you will get to keep the property attached to that debt. But be aware that it will be as if you never filed bankruptcy for this particular debt and this debt will not be discharged in your bankruptcy. If you stop making payments, the creditor not only can repossess the property, but also can sue you for any amount you owe that is in excess of the asset’s worth, which could result in a judgment against you and collection efforts, including wage garnishment.
Do I have to sign a reaffirmation agreement?
No. Reaffirmation agreements are strictly voluntary, and you cannot be forced to sign one by the creditor or the court. If you changed your mind, you can let the judge know that today.
What happens if the judge does not approve my reaffirmation agreement? Can I still keep my property?
Possibly. Some creditors may allow you to do this, even if not required to do so legally. The terms of your contract might provide that your bankruptcy constitutes an automatic default and allow your creditor to reclaim the property—even if payments are current—once the protection of the automatic stay ends. However, under Nevada law, automatic default provisions in retail installment sale contracts (“RISC”) for vehicles entered into on or after October 1, 2011, are not enforceable, and were removed from the state-required RISC forms in 2012. If you have such a contract, it may not be in your best interest to reaffirm the debt and you can keep your vehicle as long as you are not otherwise in default, (e.g., your payments and insurance are current).
Also, you don't need to enter into a reaffirmation agreement for your mortgage loan (and the judge generally won't approve reaffirmation of a loan secured by real property) in order to keep your house—just continue making your timely mortgage payments.
I want to keep my property, but I don’t want to reaffirm the debt. Do I have any other options?
Yes. If the item is personal property, you might be able to pay the creditor a lump sum payment in the amount the item is worth, rather than reaffirm the full debt. This may be a good option for furniture, household goods, and appliances which are often worth less than the debt.
If the judge approves the reaffirmation agreement, can I change my mind later?
That depends. A signed reaffirmation agreement can be canceled at any time before your bankruptcy case is discharged, or within 60 days after the signed agreement is actually filed with the court, whichever occurs later. You do not need a reason to cancel the agreement, but you must provide notice of the cancellation to your creditor.
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