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To Reaffirm or Not Reaffirm: That is the Question

by Adam Mack

If you have filed a chapter 7 bankruptcy in Kansas and you have a secured debt, you are going to have to choose whether or not you are going to reaffirm that debt.  If you choose to reaffirm the debt, then you have to sign a reaffirmation agreement and that agreement must be filed with the Court.  For the sake of clarity, a reaffirmation agreement is a court form that is filled out that recreates the legally enforceable contract which is otherwise rejected and discharged under the bankruptcy.

For you to be able to reaffirm your debt, you are going to have to show the court on the reaffirmation agreement form that you can financially afford to do so.  If the numbers on your bankruptcy schedules I & J (forms in your initial filing that show your income and expenses) do not show that you can afford the debt, then you are going to have to explain to the judge why reaffirming your debt does not create a hardship for you.  Then, at the judge’s sole discretion, the judge can decide to allow the reaffirmation of the debt or not.

However, how to get the reaffirmation through the court is only one of the questions you should be asking.  The more important question is whether you should reaffirm debt to begin with.  Not reaffirming a debt in Kansas may be a calculated risk that is facts-specific and must be analyzed and explained by a Kansas bankruptcy lawyer.  However, I can tell you that in most cases, I counsel my clients not to reaffirm their debts.

A frequent example I run across when consulting clients on reaffirmation agreements is with car loans.  When looking at these situations, it is best to plan for the worst case scenario.  We always hope that bankruptcy will be your fresh start, but part of my job is to try my best to plan for those cases where the hard times continue.

That said, if you have a car loan and you reaffirm the debt in your bankruptcy, then you find you just can’t keep up with the payments, then the bank will take the car back and sell it (often times at auction).  More often than not, there will be a deficiency (the difference between what they got out of the car and what you owed them).  When this happens, they will look to you to pay the difference.  If you do not pay them, then you are back to collection, law suits, garnishments, etc.

On the other hand, if you do not reaffirm and the same scenario plays out, then the bank cannot come looking to you to satisfy that deficiency.  You may still lose the car, but you will not have a new debt to pay off.

So, what are the downsides to not reaffirming?  Despite the fact that I tend to lean toward not reaffirming debts, there are  some downsides.  For example, when a person does not reaffirm a debt but continues to pay the debt, it will not be reflected on their credit report, because points are not added to the debtor’s FICO credit score for paying a discharged debt.  Also, in some circumstances, a bank might still be able to repossess property when the lien on that property is not reaffirmed.  However, in my experience, I have never seen this happen when a debtor is current on his or her loan at the time of filing.

Please note that while, more often than not, not reaffirming is the advice I generally give, there are times that you should reaffirm.  You should seek legal counsel to help you understand what you should do in your specific case.


These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!