Reaffirmation Agreements in Bankruptcy Cases

You may have filed for Chapter 7 liquidation which requires you to sell some of your property and assets. Unsecured debt, which has no collateral associated with it and nothing that can be repossessed by lenders, is typically discharged in Chapter 7. Secured debt, like auto loans and home loans, for instance, are typically nondischargeable. Your bankruptcy filing may require you to sell some of these types of assets to appease the creditors who hold your secured debt. There are options however to keep certain properties.

When you discuss your situation with us, we will do all we can to help but we will also be completely candid with you about the risks of reaffirmation agreements. Our goal is to help you achieve long-term debt relief. Call (310) 220-4147 now.

What is a Reaffirmation Agreement?

If you have fallen behind on auto payments or your mortgage and you want to keep the property after filing a Chapter 7 bankruptcy, a reaffirmation agreement may be the solution. A reaffirmation agreement allows you keep any recently purchased property if you can keep up with the payments, essentially "reaffirming" in a contract that you will continue to be responsible for the debt even after the completion of your bankruptcy case.

What Happens If I Default on a Reaffirmation Agreement?

If you have fallen significantly behind on these payments and catching up does not seem reasonable, you may be forced to lose your property. This means your house could be foreclosed or your vehicle can be taken away, and you will still be required to pay off any remaining balances after your property is liquidated.

How Does Reaffirmation Work?

Since home mortgages, car loans and similar kinds of debt are considered secured debt, the lender or their collection agency can take the property from you through foreclosure or repossession if you violate terms of the loan. Through debt reaffirmation, you may be able to avoid this by entering into a new contract with your lender. The new contract will affirm that the property loan will be paid off and the debt will not be discharged through bankruptcy.

What Are the Risks of a Reaffirmation Agreement?

While this may seem attractive and we can be your guides through the process, there are risks. By entering into the reaffirmation agreement, you will be personally liable for the debt despite your bankruptcy relief. If you cannot make the payments, you will likely lose your property and inflict considerable damage to your credit and your ability to get loans in the future. By filing Chapter 7 bankruptcy, you may qualify for a reaffirmation agreement, and we will guide you through the risks and rewards of such an agreement.

Should I Sign a Reaffirmation Agreement?

Reaffirmation agreements are not required during bankruptcy and may not be the right choice for everyone. However, in some cases it may make sense to enter a reaffirmation if:

• It is the only option available to keep the property
• You are financially able to keep up with the payments
• You feel the property is absolutely important, such as a vehicle to take you to work

Our attorneys will analyze your situation and let you know if a reaffirmation agreement is feasible. Not everyone will qualify for such an agreement but our attorneys have decades of experience helping clients keep their property and assets even in the midst of liquidation.

Schedule your bankruptcy consultation upon request today to learn more about filing for bankruptcy.