When you file bankruptcy all, if not most, of your debts are discharged, which means you are no longer responsible for them. A Reaffirmation Agreement is a brand new agreement or contract between you and your creditor in which you voluntarily choose to remain liable for the debt after you receive your bankruptcy discharge. The terms of the Reaffirmation Agreement are generally exactly the same as the terms of your original contract. There are two major types of debts that you most likely will have to sign a Reaffirmation Agreement for if you wish to keep the property secured by the debt. These two types of debts are car loans and mortgages.
Ok, so you filed bankruptcy. Your vehicle is financed and you believe that by filing bankruptcy it will be much easier to continue making your car payments. When you are contacted by the finance company about reaffirming the car loan, you do so without hesitation. However, a month or two into the reaffirmation agreement, you realize that it is still very difficult to make the monthly payments and decide it would be a better decision to surrender the vehicle and purchase a new vehicle with lower monthly payments. Can you change your mind and rescind the Reaffirmation Agreement? The answer is, as usual in the legal field, possibly and it depends.
11 U.S. 524(c)(4) of the United States Bankruptcy Code defines when a Reaffirmation Agreement may be rescinded. A Reaffirmation Agreement may be rescinded by a debtor under two very specific circumstances (which ever occurs later):
- Within sixty (60) days of filing the Reaffirmation Agreement with the Court; or
- Any time before receiving your discharge.
If you fall into one of these two categories, you must notify the creditor. It is best to notify the creditor in writing sent via certified mail with a return receipt requested. Once you have received the return receipt, you should file the notification of cancellation letter you sent to the creditor along with the proof of service (the green return receipt slip) with the Court.
Being able to rescind a Reaffirmation Agreement is a vital tool offered by the United States Bankruptcy Code. It allows Debtors, who realize a little too late that reaffirming a debt is really not in their best interests, to still be able to take full advantage of filing bankruptcy and have a true fresh start.
Regardless of being able to rescind a Reaffirmation Agreement after entering into one, signing a Reaffirmation Agreement should not be done lightly. Using 11 U.S. 524(c)(4) should only be used as a last resort and should not be abused.
So that you do not have to invoke the use of 11 U.S. 524(c)(4), it is best to first seek the advice of an experienced Jacksonville Bankruptcy Attorney who can help you decide what the best financial decision is for you. Contact the Law Office of David M. Goldman, PLLC today to speak with an attorney. If you are going to file bankruptcy, we want to help you come out on the other side in the best financial position possible.