The Short Answer
A reaffirmation agreement is a legal document that lets you keep a secured debt — like a car loan or mortgage — after filing Chapter 7 bankruptcy by agreeing to remain personally liable for it. You are never required to sign one, and the decision has real consequences either way. For vehicles, not signing usually means the creditor can repossess the car even if you're current on payments. For mortgages, NC bankruptcy judges generally discourage signing reaffirmation agreements unless the terms are changing — you can keep your home by simply continuing to make payments without reaffirming.
After filing a Chapter 7 bankruptcy and after your creditor’s meeting, the creditor that you owe for your house or car may send a document called a Reaffirmation Agreement to your attorney. A reaffirmation agreement is a document that your attorney will help you fill out. You have a choice of whether or not to sign a reaffirmation agreement. It asks for your monthly household income, monthly household expenses, and how much you still owe on your house or car. The document also asks how much your monthly payment is on your house or car, and will ask you and your attorney if you have enough money each month to make your payment on the debt that is referred to in the reaffirmation agreement.
Let’s pretend you have one mortgage and two car payments. You will receive a reaffirmation agreement for each of those payments – for a total of three reaffirmation agreements. Your attorney will guide you in which of the document should be filled out. In North Carolina, the bankruptcy Judges have discouraged the signing of reaffirmation agreements for real property (in other words, your mortgage) unless there is a change in the interest rate or monthly payment under the reaffirmation agreement. Reaffirmation agreements are most often signed for vehicles. In most districts, if you do not sign the reaffirmation agreement for your vehicle, then the creditor has the right to repossess the car.
If you do sign the reaffirmation agreement for a car payment, and the document shows that you are able to afford the monthly payment, when the document is submitted to the court, there will generally not be any problems. You will get to keep your car as long as you keep making the payments. However if, in the future, you are unable to make your car payments, the creditor has the right to repossess the car and you will be responsible for any deficiency balance after the repossession. If you sign the reaffirmation agreement but the document does not show that you are able to afford the monthly car payment, there will be a court hearing in front of the bankruptcy Judge for you and your attorney to explain why you should be able to keep your car.
If you do not sign the reaffirmation agreement for a car payment, the creditor will have the right to repossess your car. If you do not sign the reaffirmation agreement for a house payment, you will be able to keep your house as long as you continue making the payments. If, in the future, you are unable to continue making your house payment, the creditor will have the right to foreclose on your home BUT you will not be responsible for any deficiency balance after the foreclosure.
Reaffirmation agreements can be complicated, but your attorney will guide you through the process. Reaffirmation agreements are to be submitted to the court no later than 45 days after your first scheduled creditors’ meeting date. If you have not heard from your attorney regarding your reaffirmation agreement within 3 weeks after your creditors’ meeting, contact your attorney so that they can request the reaffirmation agreement from the creditor.
If you have any questions or would like to learn more about filing bankruptcy, contact Duncan Law in Charlotte, NC or Greensboro, NC for a free initial consultation.
Key Takeaways
- A reaffirmation agreement makes you personally liable for a debt again after bankruptcy, meaning the creditor can sue you for any remaining balance if you later default.
- In North Carolina, bankruptcy judges routinely discourage reaffirming mortgages unless the interest rate or monthly payment is changing under the new agreement.
- If you reaffirm a car loan and later can't make the payments, the creditor can repossess the vehicle and you'll owe any deficiency balance — the same risk you had before filing.
- If you do not reaffirm your mortgage but keep making payments, you can stay in your home — and if foreclosure ever happens later, you will not owe a deficiency balance.
- Reaffirmation agreements must be submitted to the court no later than 45 days after your first scheduled 341 Meeting of Creditors date, so timing matters.
- If you haven't heard from your attorney about a reaffirmation agreement within three weeks of your creditors' meeting, reach out proactively — don't wait for it to expire.
Attorney Insight
The mistake I see most often is clients assuming they must sign a reaffirmation agreement to keep their house — that's not true in North Carolina. Judges here have been clear: reaffirming a mortgage puts your personal liability back on the table with almost no benefit, since you can keep the home just by staying current on payments. Where reaffirmations really matter is vehicles, and even then I walk every client through the deficiency risk before we sign anything — because if that car gets repossessed two years later, you're on the hook for the difference between what it sells for and what you still owed, and your bankruptcy discharge won't protect you from that balance.
