What Is Reaffirmation?
If you want to keep certain secured property, such as your home or a car, after your bankruptcy, you can “reaffirm” that debt. This is where the debtor agrees to pay all or part of a dischargeable debt and the creditor agrees not to repossess the property as long as the debtor continues to make timely payments. Such agreements must be in writing and filed with the bankruptcy court.
Reaffirmation is the process by which you tell a secured lender that you will repay the debt, despite the bankruptcy. A reaffirmation agreement, which is signed by you, your attorney and the lender, legally obligates you to continue payments during and after your bankruptcy case. Reaffirmation agreements are not required by the Bankruptcy Code or any other law. If you enter into a reaffirmation agreement, you can change your mind and rescind the agreement during your bankruptcy case within 60 days after it is filed with the Court, or before discharge, whichever event occurs sooner. Should I reaffirm? This is a question that only you can answer. But, the first thing you should ask yourself is “Can I afford the monthly payment?” You may also want to consider whether the property that you are seeking to keep is necessary. That is, can you do without it. For instance, a number of my clients seek to reaffirm debts on personal computers. Very often, the cost of a newer model computer, that i
Although you filed bankruptcy to cancel your debts, you have the option to sign a written agreement to reaffirm a debt. if you choose to reaffirm, you agree to be legally obligated to pay the debt despite bankruptcy. If you reaffirm, the debt is not canceled by bankruptcy. If you fall behind on a reaffirmed debt, you can get collection calls, be sued, and possibly have your pay attached or other property taken. Reaffirming a debt is a serious matter. You should never agree to a reaffirmation without a very good reason.
Although you filed bankruptcy to cancel your debts, you have the option to sign a written agreement to “reaffirm” a debt. If you choose to reaffirm, you agree to be legally obligated to pay the debt despite bankruptcy. If you reaffirm, the debt is not canceled by bankruptcy. If you fall behind on a reaffirmed debt, you can get collection calls, be sued, and possibly have your pay attached or other property taken. Reaffirming a debt is a serious matter. You should never agree to a reaffirmation without a very good reason.
Sometimes creditors will allow debtors to keep their credit cards if they waive their legal right to receive a discharge on the debt. Creditors will usually offer to lower the balance on the card and to lower the interest rate on it. It rarely benefits debtors to reaffirm credit card debt because they may be able to qualify for a new card after filing bankruptcy. Also, debtors who want to keep their unpaid vehicles must either redeem the vehicle by paying the fair market value in full as determined by the court soon after filing bankruptcy or they can reaffirm the debt. A debtor who decides to reaffirm their debt on a vehicle must remain current on their monthly vehicle payment. When debtors agree to reaffirm the debt and later default on the loan, they must repay the creditor the difference between the amount they owed on the loan and the amount that the creditor received for reselling the car. Therefore, the debt is not discharged. Debtors who do not want to keep their unpaid vehicle
