What is a reaffirmation agreement?

What is a reaffirmation agreement?

A reaffirmation agreement makes you personally liable for a particular debt after the bankruptcy. It is as if you didn’t file Bankruptcy with respect to the debt reaffirmed. If you default on reaffirmed debt after bankruptcy, then you are on the hook for the debt. As a result, you ordinarily reaffirm only secured debts like your mortgage or vehicle loan.

You have three options when dealing with a secured debt in a Chapter 7 Bankruptcy case.

First, you may retain the collateral (house, car), continue to make the monthly loan payments, and reaffirm the loan. Some secured creditors require you to reaffirm the loan in order to retain the collateral. In such cases, it does not matter that you are current on loan payments. The creditor may repossess the collateral after the bankruptcy if you DID NOT reaffirm the loan. Bankruptcy Reaffirmation Agreement Second, you may surrender the collateral to the creditor and get out from under the debt. This option is great when you have a home or car you cannot afford. So you surrender the collateral and wipe out the debt.

Third, you may retain the collateral, continue making your monthly loan payments but not reaffirm the loan. This may be a viable option depending on the creditor. Sometimes mortgage lenders do not require you to reaffirm the loan in order to keep the house.

Again, a reaffirmation agreement makes you personally liable for the debt after the bankruptcy. So you must be careful in deciding whether to reaffirm a debt. Your bankruptcy attorney will advise you whether to reaffirm or not reaffirm a debt and will represent you in negotiations with the creditor.

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