Bankruptcy is an extreme form of debt relief. Under some forms -- particularly Chapter 7 bankruptcies -- the debtor’s personal property is subject to liquidation and sale. A reaffirmation agreement is an arrangement between a creditor and a debtor. Under the agreement, the creditor agrees not to foreclose or otherwise seek liquidation of a particular asset, and the debtor agrees not to discharge a particular debt and continues making payments to the creditor. It can be useful to avoid forfeiting property or putting co-signers at risk for the debtor’s balance.
Negotiate the terms of the reaffirmation agreement with the creditor. Depending on the creditor’s willingness to enter into a reaffirmation agreement, you may be able to negotiate different payment plans, interest rates and other obligations.
Obtain a reaffirmation agreement form that complies with the local bankruptcy court rules in your district. Generally, forms are available at the bankruptcy court or on the Internet.
Gather all relevant details about the debt. You must know the creditor’s name, the amount owed when you filed bankruptcy, the amount to be paid pursuant to your agreement, the interest rates prior to bankruptcy and under the new agreement, the repayment terms and information about your monthly income and expenses.
Write the information on the lines provided on the form. In general, reaffirmation agreements resemble a job application form or a tax return. For example, if the form has lines for “Total Amount of Debt Prior to Bankruptcy” and “Total Amount of Debt Under This Agreement,” you would write the amounts on the lines provided.
Attach any required documents -- such as court judgments or security agreements -- related to the debt. Sign and date the agreement. Generally, both you and the creditor must sign and date the agreement.
Submit the plan for court approval. According to the Bankruptcy Law Network, the court can still reject the agreement if the expenses exceed your income. According to FreeAdvice.com, the agreement must also be in your best interests and not impose an undue burden on you or your dependents.
Signing a reaffirmation agreement is a legal matter with possible financial ramifications. According to the Bankruptcy Law Network, debtors who sign these agreements may lose the property if they cannot make the payments. Further, if you have an attorney, you must seek his counsel to determine if the agreement will impose an undue financial burden on your finances.