What is a reaffirmation agreement and how does it work in Chapter 7 Bankruptcy?

A reaffirmation agreement is a legally binding contract between a debtor and creditor in Chapter 7 Bankruptcy. The agreement is reached when the creditor agrees to continue to extend credit to the debtor even after the bankruptcy is discharged. The main purpose of a reaffirmation agreement is to help the debtor keep certain assets that are exempt from liquidation under the bankruptcy laws. The agreement is binding once it is signed by both parties, and the debtor is then legally obligated to pay back the full amount owed. If the debtor fails to make the payments, the creditor has the right to take back the assets the agreement was established to protect. Reaffirmation agreements are only allowed in certain situations, such as if the debtor can prove that repaying the loan or getting a new loan would be difficult or impossible. Furthermore, the amount of debt the debtor takes on must not be too large for the debtor to pay, and the debtor must be able to provide proof of their income and expenses to the court to determine if they can afford the payments. In Virginia, the debtor must receive an independent counsel to counsel them on the agreement’s liabilities and consequences before the agreement can be approved. Once approved, it becomes a binding contract between the debtor and creditor and the debtor must continue to make the payments in order to keep the assets they are trying to protect.

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What is a reaffirmation agreement and how does it work in Chapter 7 Bankruptcy?

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