WHAT IS REAFFIRMING A DEBT, AND HOW IS THAT DIFFERENT FROM REDEEMING A DEBT?
Secured creditors (those creditors who have collateral for their loan, such as a car or boat) will want you to reaffirm the loan. When you reaffirm the loan, you re-obligate yourself to all of the loan terms just as if you were getting a new loan from the creditor. Although this may sound harmless, it has serious consequences. If you reaffirm and then later default on the loan, you are personally liable to pay the balance and you will have no protection on that debt from the bankruptcy. A secured creditor can repossess the collateral if you do not reaffirm the debt. This does not apply to real estate debt. If you reaffirm a car loan, for example, it will usually require court approval. If your income is less than your monthly expenses, you may be required to participate in a telephone hearing with the court where you will be required to explain to a bankruptcy judge why the reaffirmation is in your best interest and how you intend to make the payment. More often that not, when you file
