A reaffirmation agreement lets a debtor voluntarily agree to remain personally liable for a specific debt — often a car loan — that would otherwise be discharged in bankruptcy. It's optional, and it deserves careful thought before signing.
Why anyone would sign one
Reaffirming a debt, most commonly a vehicle loan, allows a debtor to keep the collateral and continue making payments without losing it — the tradeoff is giving up the discharge protection on that specific debt.
It has to be filed and often reviewed by the court
Reaffirmation agreements generally have to be filed with the bankruptcy court, and in many cases require a hearing or judicial approval, particularly when the debtor isn't represented by an attorney or the terms appear to create a hardship.
Weighing whether it's actually worth it
If the collateral's value is significantly lower than the loan balance, or the payments would strain the fresh start bankruptcy is meant to provide, walking away and surrendering the collateral instead is often the better outcome.
The rescission window
Debtors generally have a right to rescind a reaffirmation agreement within a set period after it's filed, or before the discharge is granted, whichever is later — a protection worth knowing about before signing under pressure from a lender.