When a resident of Maryland files a petition in bankruptcy, he or she expects to complete the process by having most, if not all, of his or her debts discharged, that is, determined to be uncollectible. By the same token, potential bankruptcy debtors have a few debts that they mY not want to discharge. These debts most likely involve important assets such as an automobile or a residence, and the debtor does not want to surrender possession of these assets. Is there a way that the debtor can finish the bankruptcy proceeding without surrendering possession of these assets? Two methods are available: certain debts are non-dischargeable, and certain debts can be made subject a re-affirmation agreement.
Non-dischargeable debts
Pursuant to the provisions of the Bankruptcy Code, some debts cannot be discharged in a bankruptcy proceeding. Among such debts are alimony and child support, taxes, damages in certain types of legal proceedings, and debts incurred by the operation of a motor vehicle while the debtor was intoxicated. The United States Bankruptcy Code does not allow these types of debts to be discharged.
Re-affirmed debts
A second option, which gives the debtor much more control over the process, is called reaffirmation of a debt. If the debtor owns an especially important asset, say a vehicle used in the business, the debtor can decide to “reaffirm” the debt incurred to purchase the asset. In such a case, the debtor executes a “reaffirmation agreement” and files it with the court. The statute covering reaffirmation agreements requires the court to ascertain whether the debtor understands the consequences of filing such an agreement and whether the debtor can satisfy any financial obligations imposed by the reaffirmed agreement. Reaffirmation agreements can buy important time for the debtor to renegotiate the agreement with creditor.
The advice of a bankruptcy lawyer is very important in either of these situations. In fact, the reaffirmation agreement form used by every bankruptcy court in the United States requires either the affirmation of the debtor’s lawyer that he or she has reviewed the reaffirmation agreement or a statement of the debtor that he or she was aware of the opportunity to seek such a review and that the opportunity was rejected.