When an individual files a Chapter 7 bankruptcy, they can enter an agreement with a secured creditor to reaffirm the debt. This means that the filer will be liable for the debt even though it otherwise would be discharged in bankruptcy. Since the purpose of bankruptcy is to get a fresh start from debt, as a bankruptcy lawyer I tend to discourage individuals from signing reaffirmation agreements. There are reasons why an individual will want to reaffirm a debt though. A secured creditor can refuse to allow a customer to keep property, if they do not reaffirm, and there are some car lenders who enforce this rule. Also a reaffirmed debt will show on your credit rating as being paid.
One secured debt which I really discourage people from reaffirming are furniture loans. This is because furniture depreciates rapidly from its retail value, and it is seldom worth what is owed on the loan. Furthermore, furniture lenders know the repossessed merchandise has little value, and that after bankruptcy they can no longer try to collect the debt, leaving repossessing the furniture as their only option. Thus when a furniture lender asks for a reaffirmation agreement, they will often accept a fraction of the amount owed in settlement, if you make them the offer. I have also had a number of clients, who have decided not to offer anything to the lender and to take a chance on repossession. As far as I know none of my clients have lost any furniture by taking this approach, since the lenders did not think the expense of doing a repossession was worth it.
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