Why You Should Not Sign a Chapter 7 Reaffirmation Agreement

Posted by Wesley Scott on July 30, 2019 at 12:29 PM
Wesley Scott

Lease-Agreements-in-Chapter-7I am not suggesting that there are no scenarios under which I would sign a reaffirmation agreement. That would not be accurate. In fact, years ago, I had a guy who was living in St Paul, Minnesota and he had a home loan totaling $138,100.00. The mortgage company proposed a reaffirmation agreement where the guy would pay $86,340.00 to keep the house! That was a huge discount and the client totally jumped on it and signed the reaffirmation agreement with my approval.

What is a reaffirmation agreement? When you file Chapter 7 Bankruptcy, the goal is to get “discharged” from your debt. In other words, the goal is to make your liability on the debts go away—forever! If you sign a reaffirmation agreement, you are GIVING your liability back to the creditor. Say you own a 2008 Chevrolet Impala and the vehicle is worth $6,900.00 but you owe $12,870.00 on the vehicle. Do you really think it is a good idea to give your liability back to the creditor on #12,870.00 in debt on a vehicle worth only $6,900.00? Nuts!

Vehicles have one function—to get you from point A to B. When the vehicle fails to do that, it is worthless to you. I am not fond of clients giving their liability back on any type of debt much less one like this where the reason for the debt could fail you at any moment. In the above example, it would be better if you gave the vehicle back to the lender and went and financed a vehicle for $12,870.00 that is worth $12,870.00. Make sense?


When the time is right, or when you are ready, reach out to Minnesota’s HIGHEST GOOGLE reviewed bankruptcy law firm at www.kainscott.com. You will be so happy you did!