Reaffirmation Agreements – What is it and what if the creditor won’t offer it to me?

Posted by on Aug 26, 2011 in Vehicle Repossessions & Bankruptcy | 6 comments

A reaffirmation agreement is an agreement between a debtor and a creditor that the debtor will pay a debt incurred prior to the bankruptcy filiing because such debt is otherwise dischargeable in bankruptcy.  Why would a debtor agree to that?  In dealing with secured claims (where a creditor holds a security interest in something you own), imagine you own a car that you use for your everyday livelihood.  You owe $2,000 on the loan, and the car is worth double.  The car is your only reasonable means of transportation for the foresseable future.  In such a situation, the debtor will want to reaffirm the debt to keep the car; otherwise the car lender can actually repossess the car in the event that the debt is not reaffirmed against the debtor even though the debtor has equity in the vehicle and is making ongoing payments.

Pursuant to 11 U.S.C. §362(h)(1)(A), debtors can file a statement of intention indicating an intention to reaffirm the debt owed to a creditor, such as an outstanding auto loan.  Accordingly, the lender should offer the debtors an opportunity to reaffirm the debt.  Failure by the lender to offer a reaffirmation will result in an exception to § 362(h) under § 362(h)(1)(B) allowing the debtors in essence to ride-through the bankruptcy without being subject to §362(h)(1)(A).  See In re Dumont, 581 F.3d 1104, 1114 (9th Cir 2009).  Riding through means that debtor will not be held accountable for failing to execute a reaffirmation agrrement in that limited circumstance – so a lender should weary of repossessing a car in such a circumstance where the debtor is making timely payments despite the absence of an executed reaffirmation agreement.  That’s why in almost all cases, lenders will voluntarily send out a reaffirmation agreement for the debtor to sign or allow the debtor to submit a reaffirmation agreement to the lender.


6 Responses to “Reaffirmation Agreements – What is it and what if the creditor won’t offer it to me?”

  1. Forgive my ignorance on the matter, but I have been doing a lot of reading that says that the “ride through” is no longer an option after the 2005 changes. I am filing bankruptcy right now pro se and want to reaffirm an auto loan and continue making payments. The creditor has already flat out told me via phone that they will not reaffirm. So I am wondering about the ride through option. Other websites have said it no longer applies. I would love to hear your opinion on the matter.


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