How to Cancel a Reaffirmation Agreement
When filing bankruptcy typically all, or a majority, of your debts are discharged and you are no longer responsible for these debts. A reaffirmation agreement comes into play when you are dealing with secured creditors (i.e. car loans, mortgages, etc.). When you reaffirm a debt you are signing a contract making you responsible for that debt after you receive your bankruptcy discharge.
What happens when you sign one of these agreements but later change your mind? Sometimes emotions take over and it is hard deciding whether to keep certain property. If you have signer’s remorse you can get out of the reaffirmation agreement; but you better act before it’s too late.
The United States Code § 524(c)(4) states that you have until the later of these two deadlines in which you can cancel a reaffirmation agreement:
- The date when the Bankruptcy Court issues your discharge order; or
- 60 days after the agreement is filed with the Court.
If you are going to cancel a reaffirmation agreement you need to file a notice with the Bankruptcy Court. This notice simply states that your intent has changed and you no longer wish to reaffirm the debt. You also need to notify the creditor of this decision.
Timing is very important because if you miss these deadlines you are now responsible for this debt. If you fall behind on the monthly payments your creditors can take adverse actions against you. They can repossess your car or start foreclosure proceedings against your home. The creditors can also sue you for the money still outstanding on the loan.
You need to make sure it is YOUR best interest to re-commit to this debt. You have already taken a big step in putting your debt behind by filing bankruptcy. Do not want to jeopardize your financial future by keeping debt you do not need.