Approximately 60 days after the first meeting of creditors is concluded, you will receive an order from the bankruptcy court discharging your debts. Some debts are automatically excepted from discharge (some taxes, child support, student loans, etc.); other debts are discharged unless the creditor commences a law suit against you prior to the date of the discharge (debts incurred by fraud, larceny, and a few others). Another exception to discharge is debts that are reaffirmed before your case is closed. With those exceptions all other claims against you are discharged pursuant to this court order.
Only in exceptional circumstances is signing a reaffirmation agreement a good idea. The only time I think reaffirming would be a good idea is when you receive something in exchange for your agreement to reaffirm. All Credit Unions will stop doing business with you and close all your accounts, if you do not reaffirm all debts with them. In some circumstances, it might be worth it to you to reaffirm debts with a Credit Union so you can maintain your accounts at the credit union. Another time when reaffirming might be a good idea is where the bank agrees to alter the terms of your loan in exchange for the reaffirmation agreement. Alterations could include lowering the principal amount of the loan, lowering the interest rate, lowering the payments, or putting payment arrears onto the end of the loan.
Reaffirming with a Credit Union is a relatively simple process. The bankruptcy statues require a judge to sign off on any reaffirmation agreements involving credit unions. Accordingly, if you want to reaffirm with a Credit Union, all we need to do is to obtain a proposed reaffirmation agreement from the Credit Union; I need to fill it in and sign it; you need to sign it; then we return it to the Credit Union and the Credit Union files the reaffirmation agreement. The judge must approve it and that concludes that matter.
However, reaffirming with creditors who are not Credit Unions is not a simple process. In addition to obtaining the reaffirmation agreement, filling it out, signing it, and filing it with the court, the judge must approve the reaffirmation agreement. The problem with this is that bankruptcy judges do not like approving reaffirmation agreements. Most of the Minnesota judges have specifically stated that they will not sign off reaffirmation agreements involving pick-ups and SUVs. Accordingly, unless you are well able to make the payment generally, you cannot get those reaffirmation agreements approved.
Furthermore, the judges can schedule a hearing and require you to appear. Quite obviously, if the judge schedules a court appearance they are going to want me to appear. The hearing would be in St. Paul. Usually this would involve you having to take time off work to appear and it would involve me having to drive to St. Paul to appear. My appearance at reaffirmation agreements hearings is not part of the retainer agreement that you and I entered into when we filed the bankruptcy. Accordingly, if I am going to have to appear I would expect to get paid $250 per hour. Then, even if both of us appeared there is a likelihood the judge will not sign off on the reaffirmation agreement and we will have gone through all that effort and expense for nothing.
Some creditors take the position that if you do not reaffirm a debt discharged in bankruptcy that that event is a substantial breach of your security agreement and that the creditor is able to repossess the collateral. This does not apply to homesteads. You do not have to reaffirm your homestead to keep it. (However, you must keep the mortgage payments current).
Wells Fargo and some other banks have a policy that if you do not reaffirm with them, they will not report your payments to the credit reporting agencies. That can be a problem. I believe this problem can probably be remedied by you contacting the credit reporting agencies and advising them that there is a mistake in your credit report in that your timely made house payments or car payments do not show. I believe that it is the legal obligation of the credit reporting agency to verify the fact that you have made these payments and once they have done that to show them on your credit report. This is a hassle but I believe the hassle is better than signing a reaffirmation agreement merely so the bank reports your payments on your credit report.
Wells Fargo, and some other bank also, will refuse to send monthly loan statement s if you do not reaffirm. Again, my suggestion is to not reaffirm and to simply make a photocopy of one of your most recent statements and be sure to make your monthly payments on time. Alternatively, you could make these payments online.
In closing, all debtor lawyers do not like reaffirmation agreements. Most debtor lawyers refuse to sign them. I am willing to help you with reaffirmation but there might be additional fees involved.
All financial records. This includes:
Most recent bank statements
Most recent bills from every creditor
Most recent payment coupons for vehicles (lease or purchase), real estate, and
Bills or invoices for purchases in the last year
Files from previous litigation, including especially any judgments that have been
entered against you
Files from previous attorneys
Any divorce decree or other court order that requires you to pay child support or
Canceled Checks for any expense you cannot otherwise document
ALL your correspondence with or regarding creditors, especially threat letter
ALL insurance policies
Tax returns for the last three years
Your lease or mortgage
Any promissory notes you have signed
Other documents relating to debts you owe other people
Any proof that anyone owes you money Any lawsuits with which you have been