A reaffirmation agreement is a document used in conjunction with a personal Bankruptcy filing that “restates” or puts the terms of a contract with a creditor back into place, as if the bankruptcy had not been filed with respect to that creditor and that debt/loan.
A reaffirmation agreement is usually prepared by the creditor holding the lien on the vehicle. A reaffirmation agreement is beneficial to the creditor because it allows that creditor to sue for money that is due on the loan should the debtor fall behind on his or her payments. You DO NOT have to sign a reaffirmation agreement — it is voluntary. You may be eligible to get loans for bad credit. Stated another way, if you sign a reaffirmation agreement and the car it is later repossessed, the creditor can hold the debtor responsible for any money that is due on the loan (even if the car is wrecked or stolen).
But, this company reminds us in their recent posts that, if you do not sign a reaffirmation agreement, the creditor may repossess the vehicle even if you are current on your payments.
You can try keeping your car after filing for Bankruptcy without signing a reaffirmation agreement, but if you do, you must make your payments on time each month. Be aware, however, that your creditor may still repossess the car at anytime and any payments made will not be refunded in the case of repossession.
If you wish to attempt to negotiate a lower amount or better payments on your vehicle loan, you may wish to do so prior to the time you sign any reaffirmation agreement. The modified terms can then be placed into the reaffirmation agreement and be binding on both the debtor and the creditor.
The reaffirmation agreement must be filed with the Bankruptcy Court prior to receiving your bankruptcy discharge.