© Walker & Walker Law Offices, PLLC. 2025 | All rights reserved.
A reaffirmation agreement is a contract between a debtor and a creditor to keep the creditor’s debt out of the bankruptcy.
In effect, signing a reaffirmation agreement puts you back on the hook for the debt.
You do not have to sign reaffirmation agreements in many cases.
In fact, you should not sign a reaffirmation agreement without first talking to your attorney about the consequences of doing it.
Reaffirmation agreements, although required by the bankruptcy laws for every secured debt that the debtor will continue to pay, are often not necessary in practice.
This is because the only penalty for failure to sign the reaffirmation is that the creditor might repossess the collateral securing the loan.
The collateral is usually a car or a house for consumer bankruptcies.
The creditor, however, wants money, not collateral, so the creditor prefers to continue to receive payments and interest rather than take the collateral.
If the creditor decides to take the collateral because the debtor did not reaffirm the debt, then the creditor will not get any payments, because the bankruptcy discharged the debt.
The creditor will also have to pay to foreclose on the house, or to repossess the car, which is expensive, so if the creditor insists on a reaffirmation agreement, then the creditor might get stuck with the collateral and will not get any payments.
This is exactly what the creditor does not want.
Creditors want predictable monthly payments, they do not want to auction off cars and houses for a fraction of their value.
Because insisting on the reaffirmation agreement is often a losing game for creditors, many creditors will simply allow the debtor to keep making the normal payments and keep the collateral.
This is the best option for the debtor because you will have the collateral (i.e. you can live in the house or drive the car), but you won’t be on the hook if something happens to the collateral.
Examples of this are:
If you sign a reaffirmation agreement and one of these happens, then the creditor can sue you to collect the balance.
A good Minnesota bankruptcy lawyer will ask your creditors whether or not they will repossess the collateral without a reaffirmation agreement.
Then the attorney will make sure that you do not sign any reaffirmation agreements unless they are absolutely necessary.
What is the main downside of not signing a reaffirmation agreement?
The main downside of not signing a reaffirmation agreement is that the lender will often deny you access to online account records.
The lender will usually continue to accept the monthly payments, just make sure to put the loan number in the memo field of your check or money order.
If you’re being asked to sign a reaffirmation agreement and you’re not sure whether you should, then you need help.
Why not contact us at 612.824.4357 now or visit one of our offices in Minneapolis, St Paul, Blaine, and Brooklyn Park and tell us how we can help you.
Over 575 likes on Facebook!
Over 150 YouTube videos!
Walker & Walker Law Offices, PLLC