When you sign a reaffirmation agreement for a secured debt or any other debt, the matter will be set for hearing if your attorney did not sign the agreement. Many attorneys will not sign a reaffirmation agreement, because of concerns with your budget and the potential future consequences of reaffirming the debt. When the reaffirmation agreement is filed with the court, it will be set for a hearing. At the hearing the bankruptcy judge will review your reaffirmation agreement, and ask you questions to determine whether the reaffirmation is in your best interest and whether it places an undue burden on you.
What Generally Happens At the Reaffirmation Hearing?
In most cases the bankruptcy judge may first address all of the debtors present at the hearing. Generally the judge will begin by explaining the following
- What is a Reaffirmation Agreement-The Judge will explain what it means to reaffirm a debt and why it is done.
- Consequences of Reaffirming the Debt-The judge will in many cases explain that you will remain personally liable for the debt and if you fail to pay the debt, the creditor may take possession of the collateral (vehicle, etc.) and sue you for the remaining balance.
- What Are Your Options-The judge will go over the different options available to you including surrendering the vehicle, redemption and reaffirmation.
After the bankruptcy judge provides this information to you he will call one person at a time to review your reaffirmation agreement and discuss whether it is in your best interest.
What Will The Bankruptcy Judge Ask Me?
Before a judge can approve your reaffirmation agreement, he/she must determine that it is in your best interest to reaffirm the debt. The judge will ask questions that will help them determine if reaffirming the debt will help you. The judge will generally ask questions such as:
1. Are you current on your car payment?
2. Whether you need the vehicle? Is this your primary means of transportation?
3. What is your income? Has your income changed?
4. What is the value of your vehicle?
5. Can you afford to make the payments?
The judge will also look at the reaffirmation agreement to review what is the total debt you are reaffirming and what is your interest rate. The judge will also analyze your overall income and monthly expenses. If you have a negative budget, owe more than what the item is worth, and you have a high interest rate then the judge may not approve your reaffirmation agreement.
If the Judge Does Not Approve My Reaffirmation Will They Take Away My Vehicle?
Most people at a reaffirmation hearing are reaffirming their vehicle. They are worried that if the judge does not approve their reaffirmation agreement then their vehicle will be taken away. Generally if you have done all that you needed to do, to reaffirm the vehicle, but it was denied by the judge, car lenders will allow you to just retain the vehicle and continue to pay it. To read more about this and reaffirmation agreements go to:Reaffirming Your Vehicle in A Chapter 7
If the Judge Approves My Reaffirmation Can I Cancel It Later?
If the judge enters an order approving your reaffirmation agreement, you can still cancel the reaffirmation agreement. You can cancel the agreement as long as you do it before your discharge is entered or within 60 days of the reaffirmation agreement being filed with the court (whichever is later).