What does Reaffirmation of Debt mean?

[Mike]

We filed Ch. 13 BK and it was discharged 8/07. I am delinquent on our second mortgage. I just pulled our credit report and it states under the second mortgage creditor: Reaffirmation of debt. What does this mean? Are they foreclosing?

[rachael24]

After a debt is discharged in a bankruptcy proceeding, you can still choose to repay it. This is known as debt reaffirmation—and it can have some good effect in your credit rating, much like getting a reinstatement on a foreclosure or paying a charge-off (though a reaffirmation doesn’t have quite as positive an effect as those other cures).
Reaffirmation agreements must be filed with the bankruptcy court. To be approved, they:

• should be undertaken voluntarily;
• must be in your best interest; and
• must not unduly burden you or your family.

Some credit card issuers and retailers have begun approaching consumers after their debts have been discharged by a bankruptcy, pressuring those consumers to reaffirm their debts—in exchange for issuing the bankrupt people new credit cards.

If you have declared bankruptcy, you do not have to reaffirm any of the debts that were discharged. And, while reaffirming may improve your standing with a particular creditor, it has only a minor effect on your credit. A better strategy for improving your credit is to pay all of your non-discharged and new debts in a timely manner.

While some credit card issuers will try to get consumers—often unwittingly—to reaffirm a debt that was defaulted on when they apply for new credit cards, these companies cannot force you to reaffirm a debt that was discharged via a bankruptcy.

[gtull1]

Great answer Rach!! I just want to add that a lot of these credit card companies just want to bully you into paying your debt, even though it was discharged in bankruptcy. Sadly, a lot of folks that don't know any better fall for the "scam". Unless you really have a good reason to do so, never reaffirm a debt!!