Bankruptcy debts can be repaid. In some instances, the debtor may wish to reaffirm certain secured debts, such as automobile loans. Reaffirmation means that the debtor is giving up his right to have the debt discharged, in exchange for being able to keep the property and maintain his original contractual rights. A reaffirmation is required to be approved by the court prior to entry of the discharge. The courts want to ensure that debtors do not jeopardize their precious fresh starts by re-obligating themselves on debt that they otherwise could have discharged. This is especially important in light of the fact that now, under BAPCPA, a debtor may obtain a Chapter 7 discharge once every 8, instead of every 6, years.

Procedure to Reaffirm a Debt

Under BAPCPA, there are very strict disclosure and other requirements in connection with reaffirmation agreements. If the debtor's income and expenses as shown on Schedules I and J show a deficit of income to pay on the secured debt, there is a presumption of undue hardship. In such instances, the Court will often disapprove of the reaffirmation agreement, unless the Debtor can convince the court otherwise. If the debtor is represented by an attorney in the course of negotiating the reaffirmation agreement, the attorney is required to sign a statement that the debtor's choice is fully informed and voluntary. He will also need to state that reaffirmation of the debt will not create an undue hardship on the debtor or the debtor's dependents.

Can The Debtor Voluntarily Repay a Debt?

Under Code Section 524(f), nothing prevents a debtor from voluntarily repaying a debt, after the discharge is entered and the case is closed. The Code is quite clear, however, that any attempt to collect on a discharged debt absent the debtor's consent is a violation of the so-called "discharge injunction" of Code Section 524(a)(2).

Written by Henry Rendler