Keeping Secured Property In Chapter 7 Bankruptcy: A Guide To Reaffirmation Agreements

By filing for bankruptcy under chapter 7, you are agreeing to surrender all of your assets to a trustee who will then liquefy them in favor of paying back your creditors. What most Americans don't know is that they don't have to surrender secured properties if they file a reaffirmation agreement within 60 days of the meeting of creditors with a bankruptcy attorney.

What Is a Reaffirmation Agreement?

A reaffirmation agreement is basically a legal document that outlines an agreement that you will still owe a debt to the creditor after the bankruptcy, so that you can keep a secured property. The agreement will be reviewed in court by a judge, who will determine whether you can afford the specified payment plan and whether the agreement is in your best interest. Your attorney will also need to certify that the reaffirmation agreement will not cause undue hardship on your financial situation.

In most cases, to qualify for a reaffirmation agreement, you must have equity in the secured property that is exempt for the agreement to be approved. In addition, you need to continue making payments on the debt prior to filing for bankruptcy.

The reaffirmation agreement may involve completely different terms and conditions to what you may be currently tied to. Most attorneys recommend negotiating with the creditors to get them to accept a lower debt balance.

When Should You Agree to a Reaffirmation Agreement?

Since you will still owe a debt after the bankruptcy case is over, a reaffirmation agreement can place a level of financial strain on your future financial situation. Most bankruptcy attorneys recommend to only agreeing to a reaffirmation agreement in the following situations:

  • The creditors insist on it;
  • You have a strong desire or need to keep the secured property in question; and,
  • You believe that you can successfully pay off the remaining balance on the debt.

What Are the Advantages and Disadvantages of This Agreement?

Reaffirmation agreements are not that popular with bankruptcy filings because you will be stuck with the debt outlined in the reaffirmation agreement even after the bankruptcy case. In addition, since you cannot file for bankruptcy again until after 8 years, you run the risk of being stuck with the debt for a long time even if things don't work out.

There are some advantages, however, that you also take into consideration. They include:

  • Being able to keep the secured property without having to surrender it to a trustee.
  • Having the ability to negotiate new payment terms, lower interest rates and the total payment time with the creditors again.


If you think that a reaffirmation agreement may be beneficial for your situation, discuss the possibility with a bankruptcy attorney representing your case. It is important to thoroughly examine how the agreement will affect your post-bankruptcy financial situation, as there is no going back once the agreement has been approved. You can look for information online, such as at, if you still have questions.