The Notice of Rescission of Reaffirmation Agreement Form Explained

What is a Reaffirmation Agreement?

A reaffirmation agreement is a contract between a debtor and a creditor in a Chapter 7 bankruptcy case (sometimes also referred to as a no-asset case) which allows the debtor to reaffirm (i.e. cancel the discharge of their debts) an obligation to repay a debt owed to the creditor in full after the bankruptcy case is over. The most common use of a reaffirmation agreement is for the debtor to reaffirm a secured debt such as a home mortgage or an automobile loan. However, a reaffirmation agreement can also be used to reaffirm unsecured debts such as a personal loan to the debtor from a close family member.
A reaffirmation agreement in a personal residence mortgage is generally advantageous to the debtor because it allows the debtor to keep their personal residence after the bankruptcy case is over while discharging their personal obligation to pay the remaining balance owed. However , if the debtor agrees to reaffirm the mortgage, any or all foreclosure proceedings initiated prior to the filing for bankruptcy can be halted.
As noted, a confirmable reaffirmation agreement is one in which the debtor agrees to repay the entire loan balance that remains after the personal debtor has filed for bankruptcy under Chapter 7 even though they would ordinarily have the debt discharged through bankruptcy. A reaffirmation agreement is not required in a Chapter 7 bankruptcy case but some creditors require it as a precondition to keeping the property (often Motor Vehicles).

The Purpose of a Notice of Rescission

A Notice of Rescission is a document that a debtor files in the bankruptcy court to notify the court that a reaffirmation agreement in their bankruptcy case has been rescinded. When a notice of rescission is filed, it nullifies the effect of the reaffirmation agreement, and allows a debtor to avoid the legal obligation under the reaffirmation agreement. A Notice of Rescission may be used in cases where debtors have executed an Affidavit of Financial Management but did file a Notice of Intent to Rescind with the court by the deadline set forth in the Bankruptcy Code. Filing the notice with the court and the creditor labeled on the Notice of Rescission of Reaffirmation Agreement Form may be used to avoid a situation where the debtor continues to be liable on a debt, even though the debt should have been discharged in the bankruptcy case.

Filling Out a Notice of Rescission Form

To complete the Notice of Rescission of Reaffirmation Agreement form, follow these steps:
ITEM 1
Check the correct box based on the type of bankruptcy chapter filed. Generally, if it was a liquidating bankruptcy with no exceptions made or if two years have passed since the entry of the discharge order, you should check "Chapter 7."
ITEM 2
List each case number and the date of each discharge order in connection with that case.
ITEM 3
Provide the address where the reaffirmation agreement was filed with the Court. This is typically the U.S. Bankruptcy Court for the district where you filed for bankruptcy. In that together, the line states this is the Court where the reaffirmation agreement is filed. Just note the "signature" line is typically not signed by the debtor. It is signed by the attorney representing the bank/creditor you reaffirmed your debt with.
ITEM 4
This line is only for the signature line of the attorney for the debtor. The attorney must sign this line certifying that the original "Reaffirmation Disclosure Statement and Agreement" has been filed with the court and that the debtor has a copy. Essentially, just providing this statement to the Judge.
IMPORTANT NOTE
The discharge order generally states, "Any Pre-Discharge Statement of Disclosure and Reaffirmation Agreement entered into during a Chapter 7 bankruptcy proceeding does not bind the Debtor unless the Agreement is approved by Order of the Court." The Judge will only approve the reaffirmation agreement if the debtor has undergone the required briefing, the summary of the document is provided, the document has been signed by the debtor under oath, the debtor is receiving undue hardship, etc.

The Legal Consequences of Rescinding a Reaffirmation

The Notice of Rescission of Reaffirmation Agreement Form, Form B 241, is a document that can be downloaded from the Bankruptcy Forms website of the Administrative Office of the United States Courts. The form is fairly self-explanatory and has instructions attached to the form. However, the legal implications of rescinding a reaffirmation are significant.
If a debtor changes her mind about reaffirming the debt after the reaffirmation agreement was entered into but before it is approved by the Court, the debtor may file this form with the Court and no further action will take place. The law allows a debtor to rescind a reaffirmation agreement even if the debtor has signed the agreement before it was submitted to the court for approval. 11 U.S.C. § 524(c)(3). Once the court acts to approve the reaffirmation agreement, the debtor can no longer rescind it. In In re Penfil, 344 B.R. 840 (Bankr . W.D. Mich. 2006), the debtor submitted a new Form B240A, having changed her mind about reaffirming prior to the hearing set by the court on the original reaffirmation agreement. After a hearing, Judge Robert جاء graciously found "that because the debtor submitted a timely and proper Form B240A indistinguishable in all ways that matter from the original Form B240A [on which the court had already scheduled a hearing], the new reaffirmation agreement is approved pursuant to § 524(c)(o)."
If a debtor gets a court hearing date and time for entry of an order approving the reaffirmation agreement, the debtor can rescind in three ways: The effect of filing a timely notice of rescission is to render the reaffirmation agreement void. See 11 U.S.C. § 524(c)(4). If the debtor subsequently wishes to reaffirm the debt, a new reaffirmation agreement must be filed and approved by the court.

Timelines and Deadlines to Keep in Mind

For many people, filing the Notice of Rescission of Reaffirmation Agreement Form can be all a murky process due to the complex web of interdependent deadlines and timelines. One of the key aspects to remember is that once signed, a reaffirmation must be filed with the bankruptcy court within 60 days for it to become binding on the debtor. Once the reaffirmation is filed, the debtor has until 60 days after the creditor files the Reaffirmation Agreement (or until the entry of the discharge, whichever is later) to file a Notice of Rescission.
The rescission must be in writing, and must state that the debtor is exercising his or her right to rescind the reaffirmation agreement. Because of the complex set of variables regarding the deadlines for rescinding a reaffirmation agreement, it may be beneficial to consult with your attorney to ensure that all of the deadlines are met and that everything is filled out correctly and submitted in a timely manner.

Consulting with an Attorney

Taking the time to consult with your bankruptcy attorney prior to filing a notice of rescission of reaffirmation of debt will provide you with advice regarding if compliance with the statute is proper. The attorney can also discuss the advisability of making such a decision.