Reaffirmation Agreements: The Silent Way Creditors Hurt Your Credit After a Chapter 7 Discharge

The following discussion examines Reaffirmation Agreements and how it affects credit reporting obligations under federal law. I provide an expert-level breakdown of creditor policies and debtor options.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on November 4, 2025.

Listen: The Professor’s Audio Briefing.

Key Takeaways with Reaffirmation Agreements:

• Reaffirmation Agreements are voluntary contracts used in Chapter 7 bankruptcy when a debtor wants to keep secured assets (like a car or house) and agrees to remain personally liable for the debt.
• Creditors commonly stop reporting payments on a secured debt to credit bureaus if a valid reaffirmation agreement was not signed, often citing compliance concerns with federal law, including the Fair Debt Collection Practices Act (FDCPA).
• If creditors don’t report timely payments on secured debt in the absence of reaffirmation agreements, this prevents debtors from rebuilding their credit.

The Post-Bankruptcy Discharge Credit Dilemma

Imagine faithfully making every car or mortgage payment for years after your Chapter 7 bankruptcy, only to find these on-time payments aren’t being reported to credit bureaus. This absence of positive payment history can significantly impede your credit score recovery.

Why does this common and frustrating scenario occur? The answer often lies in the controversial Reaffirmation Agreement.

What is a Reaffirmation Agreement?

In Chapter 7 bankruptcy, a debtor must state their intention regarding secured assets. If the debtor wishes to keep the asset (the house or car), they must decide between redeeming the property (paying its value in a lump sum), or reaffirming the debt.

A reaffirmation agreement (Official Bankruptcy Form B 2400A/B ALT) is a new, voluntary contract between the debtor and creditor that reinstates the debtor’s personal liability for the debt. In exchange for the creditor not repossessing the asset, the debtor agrees to pay the debt as if the bankruptcy never occurred.

The Credit Reporting Gap: The Bankruptcy Discharge and Creditor Policy

When a debtor is discharged from personal liability on a secured debt where the asset was surrendered, the debtor’s personal obligation to pay the debt is eliminated. The creditor can no longer pursue the debtor for repayment or for a deficiency balance if the property is later taken and sold.

However, if a reaffirmation agreement was signed, the debtor voluntarily reinstated personal liability. If the debtor later defaults, the creditor retains the right to pursue collection of the entire remaining loan balance. This loss is referred to as the deficiency balance.

For example, if a loan balance on a car is $15,000, and the car is repossessed and sold at auction for $10,000, the debtor is responsible for the $5,000 deficiency only if the reaffirmation was signed.

When a reaffirmation agreement is not signed, creditors assert that reporting payments on a discharged debt could be interpreted as an attempt to “collect” a discharged debt, potentially violating the Fair Debt Collection & Practices Act (FDCPA). Therefore, creditors have adopted a blanket policy of not reporting payments to the credit reporting bureaus (link) when a debtor keeps the asset, but does not reaffirm the debt.

This policy is rooted in the creditors’ overly broad interpretation of the FDCPA, a stance many bankruptcy law experts (including myself) believe is a tactic to strong-arm debtors into signing reaffirmation agreements.

The Impact of the BAPCPA (2005) on Secured Debt

Prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), many districts allowed debtors to utilize the “ride-through” option. Under this practice, a debtor could simply continue making timely payments on a secured asset (like a car) without signing a reaffirmation agreement, and the creditor would not attempt to repossess or foreclose. Crucially, the payments were often still reported.

BAPCPA effectively ended the ride-through option in most jurisdictions. BAPCPA required that debtors formally choose one of the three options (reaffirmation, redemption, or surrender). This change significantly strengthened the creditor’s position, as the primary incentive for the debtor to sign the reaffirmation agreement was to have a positive payment history reflected on their credit report.

Debtor Options When Payments Aren’t Reported

When a creditor refuses to report post-discharge payments due to a lack of a reaffirmation agreement, the debtor is faced with a difficult choice:

1. Credit Bureau Dispute: The debtor can formally dispute the accuracy of the non-reporting with the major credit bureaus (Equifax, Experian, TransUnion). While legally sound arguments exist that the payments should be reported, this often leads to an endless loop of frustration as the reporting may appear and then disappear.
2. Refinance the Secured Debt: The most effective and reliable solution is often to refinance the car or mortgage with a new lender. Since the refinanced loan is a new contract created after the bankruptcy filing, it is entirely separate from the discharged debt. The payments on this new, refinanced debt will be reported accurately, immediately beginning the process of building a positive credit history.

The Professor’s Take on Reaffirmation Agreements

The decision of whether to sign a reaffirmation agreement involves a careful risk/reward analysis. While signing one ensures credit reporting, it also reintroduces personal liability for a potential deficiency balance if the asset is later repossessed or foreclosed upon. The alternative, avoiding reaffirmation to escape deficiency liability, comes at the cost of slower credit rebuilding.

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Updates:

• March 19, 2025.
• September 9, 2025.