Before we can dive in to the topic of reaffirmation agreements and, thus, answer the question posed in the title, let’s discuss some basics about bankruptcy. As you know, when you finalize your bankruptcy, your unsecured debts will be eliminated in the discharge process. This is great because it means that you no longer have an obligation to pay your creditors. However, some of those debts may be attached to important pieces of property assets that you have, like your car.
When you have a car loan, it means your bank has a lien on the car and expects you to pay them back. When the loan is discharged through bankruptcy, it would mean that you would lose the car because now that the loan is gone, the bank will “take back” the car that they own.
But there is a way that both parties can be appeased in this situation, and that is where the reaffirmation agreement comes into play. This agreement says that the loan is “reaffirmed” (hence the name), allowing you to keep the car (or home, or whatever asset is being discussed).
With a bankruptcy in your rearview mirror, you will have a greater financial capacity to deal with your car loan after it has been reaffirmed.
Securing these reaffirmation agreements can be a little tricky, so it is best for those going through a bankruptcy to consult with an experienced attorney to ensure that their case is properly handled. As with all things bankruptcy, you should never go it alone.