The tradeoff you accept when filing for Chapter 7 bankruptcy is the risk of losing assets. You can receive forgiveness of debt, but you always take on this risk with this branch of bankruptcy. To help people prevent this from occurring, bankruptcy attorneys try to use reaffirmation agreements in cases. Here is an explanation of what this is and how it can help you keep your secured assets.
What Is a Reaffirmation Agreement?
In a Chapter 7 bankruptcy case, you might have the option of keeping secured assets, but this is an option. You do not have to choose to keep secured assets. If you decide you want to, though, you must complete a reaffirmation agreement with the lenders of the assets.
A reaffirmation agreement states that you agree to continue paying for the asset you want to keep. You must agree to keep the same terms of the original agreement, and you must continue making the payments. Your attorney will fill out the agreement and send it to your lender. The lender can decide whether to agree to it and sign it or reject it. If the lender agrees, you can keep the asset tied to the loan.
When Can You Use One?
You can use a reaffirmation agreement to keep your car or home. There are stipulations that you must be aware of though. The main condition is that you must be current on the payments. If you are behind on even one payment, you might not be eligible to use a reaffirmation agreement. You might have to give up the asset you own in your bankruptcy case.
Should You Reaffirm Your Secured Debts?
Keep in mind; you don't have to reaffirm your debts. However, if you want to keep the assets, you should use reaffirmation agreements. An example of when you should not reaffirm a debt is when you believe you would not be able to continue making the payments on the loan. In this case, it would be beneficial to surrender the asset instead.
What Happens If You Fail to Follow the Agreement?
If you create a reaffirmation agreement with a lender and then fail to make the payments, the lender can pursue repossession or foreclosure.
Using a reaffirmation agreement is the best solution for you if you want to keep your car or house. You can learn more by talking to bankruptcy attorneys about your current situation and financial picture.
Share7 April 2020
Although I am far from perfect, I have focused on abiding by the local laws for the vast majority of my life. Unfortunately, about five years ago, I realized that I was being accused of a crime that I didn't commit. I thought about letting the trial run its course, but then I realized that fighting would be important to ensure my future. I teamed up with a great lawyer, and things became much easier overnight. My legal counsel told me what to do and what to avoid, and he was able to prove the facts in a court of law. This blog is all about choosing to fight charges.