Can a creditor ask a debtor to reaffirm the debt?
Yes, this means that the creditor is asking that the debtor pay thedebt anyway, even though it is eligible to be discharged in bankruptcy.A debtor may be willing to do this if there is a co-signer or guarantorof the debt (such as a family member, friend or employer) that thedebtor does not wish to leave saddled with the debt. Also, a debtor maywant to reaffirm a debt in order to avoid having a secured creditortake the collateral securing the debt. A creditor may also ask a debtorto reaffirm the debt before he (the creditor) will agree to do businesswith the debtor again. This only applies in Chapter 7 consumerbankruptcy. This will not usually happen in a business Chapter 7 .
Thedecision to reaffirm a debt is voluntary; no law requires the debtor todo it. The debtor can also choose to pay a debt that has beendischarged in bankruptcy without reaffirming the debt, which means thatthe lender has no legal rights to collect the debt. Reaffirmationagreements can't impose an undue burden on you or your dependents andmust be in your best interest.
A debt is reaffirmed in anagreement filed with the court within 60 days after the first meetingof the creditors in the bankruptcy case, also called the 341 meeting.Once you sign a reaffirmation agreement you have 60 days or until thejudge issues the discharge order in your bankruptcy case to cancel theagreement.
It is important to remember that a reaffirmed debt isnot wiped out (discharged) in bankruptcy. Once your bankruptcy order isfiled and the debt is reaffirmed, you must pay the debt. If you don't,the creditor can sue you for the balance owed or repossess the propertyin a secured debt.
(Reviewed 11.4.08)
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