A reaffirmation agreement is a contract between a debtor and a creditor to keep the creditor's debt out of the bankruptcy. This means that the debt in question will not be discharged, and the debtor will have to repay it after the bankruptcy. In effect, signing a reaffirmation agreement puts the debtor back on the hook for the debt. You do not have to sign reaffirmation agreements in many cases. Since the whole purpose of filing a bankruptcy is to get rid of debts, you should be very careful about agreeing to sign reaffirmation agreements. In fact, you should not sign a reaffirmation agreement without first talking to your attorney about the consequences of doing it.
Reaffirmation agreements, although required by the bankruptcy laws for every secured debt that the debtor will continue to pay, are often not necessary in practice. This is because the only penalty for failure to sign the reaffirmation is that the creditor might repossess the collateral securing the loan. The collateral is usually a car or a house for consumer bankruptcies. The creditor, however, wants money, not collateral, so the creditor prefers to continue to receive payments and interest rather than take the collateral. If the creditor decides to take the collateral because the debtor did not reaffirm the debt, then the creditor will not get any payments, because the bankruptcy discharged the debt. The creditor will also have to pay to foreclose on the house, or to repossess the car, which is expensive. Thus if the creditor insists on a reaffirmation agreement, then the creditor might get stuck with the collateral and will not get any payments. This is exactly what the creditor does not want. Creditors want predictable monthly payments, they do not want to auction off cars and houses for a fraction of their value.
Because insisting on the reaffirmation agreement is often a losing game for creditors, many creditors will simply allow the debtor to keep making the normal payments and keep the collateral. This is the best option for the debtor because you will have the collateral (i.e. you can live in the house or drive the car), but you won't be on the hook if something happens to the collateral. Examples of this are losing your job so you can't make payments, or getting your car or house is destroyed by an accident or fire which is not covered by insurance. If you sign a reaffirmation agreement and one of these happens, then the creditor can sue you to collect the balance. If you haven't signed a reaffirmation, then they can't sue you for a deficiency judgment to collect the loan balance.
A good bankruptcy lawyer will ask your creditors whether or not they will repossess the collateral without a reaffirmation agreement. Then the attorney will make sure that you do not sign any reaffirmation agreements unless they are absolutely necessary.
One downside of not signing the reaffirmation agreement is that lenders often will deny you access to online account records.
The lender will usually continue to accept the monthly payments, just make sure to put the loan number in the memo field of your check or money order.