This question comes up all the time – either explicitly, or implicitly – during my consultations with prospective and current clients.  Because there is no shortage of misinformation on the subject, it’s about time I wrote on it.

I.          Secured Debts

In typical consumer bankruptcy practice reaffirmation comes up almost exclusively within the Chapter 7 context, and generally in dealing with secured debt.  A secured debt is a debt that is secured by some tangible asset.  If the debtor (i.e., the borrower) fails to make the payments, the creditor (i.e., the lender) can repossess the security – i.e., the collateral.  For example, a car loan is secured by the car, and a home mortgage is secured by the home.

In order to better understand what is at work here, it helps to know a little more about secured debts.  A simple example will suffice to set the stage.  When a person takes out a loan to purchase a car, two important things happen. 
Continue Reading What Is Reaffirmation?