Can You Change Your Mind After Signing a Reaffirmation Agreement?

A reaffirmation agreement in United States bankruptcy law refers to an agreement made between a creditor and the debtor that waives discharge of a debt that would otherwise be discharged in a pending bankruptcy proceeding.

Bankruptcy laws govern both debtor and creditor in the reaffirmation process. One question often asked when filing for bankruptcy is, “Can you change your mind after signing a reaffirmation agreement?”

Bankruptcy statutes give you a “cooling off” period to change your mind about any reaffirmation agreement you have signed. After signing a reaffirmation agreement, you have a right to cancel the agreement within 60 days of the agreement being filed or prior to the court entering a discharge, whichever is later.

If you have signed a reaffirmation agreement and you change your mind, you will have to withdraw your consent. For the reaffirmation agreement to be revoked by the bankruptcy court, you must write a letter to the creditor and provide a copy to the court that informs them you wish to revoke the reaffirmation agreement.

In addition to requiring a “cooling off period”, for a reaffirmation to legally be binding, bankruptcy law dictates your bankruptcy lawyer has to also sign the reaffirmation agreement.  If done, the lawyer is stating in writing that he or she thinks you can afford to make the payments and it is in your best interests to reaffirm. Many bankruptcy lawyers may not think you can afford the contract or it is in your best interests to reaffirm and some may refuse to sign the document.

If you are filing Pro Se, without legal representation, bankruptcy law dictates you must attend a court hearing before a bankruptcy court judge before you are allowed to enter into a reaffirmation agreement. The purpose of this hearing is so the court can be sure you understand what you are entering into with the agreement, how reaffirming will affect your rights under bankruptcy laws, and whether or not you can afford the agreement.

Once you sign the reaffirmation agreement, your lawyer or court signs the agreement to reaffirm, and the 60 day cooling off period passes, you are bound by the agreement. If you do not perform your part of the contract, you have no remedy left. The creditor can repossess or foreclose on the secured assets, and they can possibly obtain a court judgment for any deficiencies the sale of the assets do not satisfy.

What does that mean? They can file a lawsuit against you for the amount they claim you still owe. In the event they are successful, they can take the judgment of the court and possibly garnish wages, bank accounts and other receivables. If you live in a state that does not allow garnishment, they can attach liens to various assets. When you want to sell those assets, you have to satisfy the legal liens against the property.

After you have waived your right to discharge a secured asset under a reaffirmation agreement, your only legal friend left is time. If the statute of limitations runs out for collecting the deficiency, you have escaped the claims, but every state has its own statute of limitations. If you are considering filing another bankruptcy, you must wait eight years. That is a long time to deal with aggressive collection agencies.

Taxes on deficiencies can also come into play. When a creditor writes-off the deficiency as an noncollectable loss, many creditors will report this as income to you. Under certain circumstances, the IRS will collect the taxes owed on the deficiency plus any interest and fees.

If you need relief from the stress of debt and you live in or around the metropolitan areas of Los Angeles or Long Beach, California, contact us at .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

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