When filing for bankruptcy debtors are faced with a number of important decisions. Throughout bankruptcy a debtor has the option to surrender property, even property that still has a loan balance. Through bankruptcy a debtor is able to surrender property without penalty or worrying about deficiencies. However, some debtors may wish to keep certain types of property, i.e. a vehicle. If a debtor chooses to keep property it would still need to be disclosed on the bankruptcy petition, however, it would be listed that the debtor is keeping the property. In some cases lenders will require the debtor to sign a reaffirmation agreement.
A reaffirmation is a voluntary agreement that must be filed within 60 days of the creditors meeting or before the case is closed, which ever is sooner. The agreement will state that the debtor is continuing the loan and will continue to make payments in accordance with the agreement. If a debtor chooses to sign a reaffirmation agreement the debtor is responsible for that particular debt as if he/she never filed for bankruptcy. Even if a debtor chooses to sign a reaffirmation agreement the debtor has sixty days after the agreement is filed with the court or the order of discharge to rescind the agreement.
Whether a debtor should sign a reaffirmation agreement is a very important decision and there are a number of factors to consider. Signing a reaffirmation agreement may allow the debtor to keep certain types of property that may be very sentimentally important to the debtor, like a house. A reaffirmation agreement may allow a debtor to keep very practical types of property, like a vehicle. When filing for bankruptcy a debtor may be hesitant to surrender property that he/she is not required to surrender.
However, in making this decision, a debtor should consider whether or not he/she can actually afford the payment. A reaffirmation effectively eliminates some of the “fresh start” offered by a Chapter 7 Bankruptcy. It would be very unfortunate to reaffirm the debt, not be able to continue payments, and eventually lose the property anyways. Debtors should also consider, even if he/she can afford the debt, whether it is truly worth signing. In signing a reaffirmation agreement a debtor will incur attorney’s fees, fees from the lender, and still have to pay according with the original contract terms. While debtors may be concerned about acquiring a new vehicle, there are lenders that specialize in helping people that have filed for bankruptcy.
If you still have questions about bankruptcy and reaffirmation agreements you can schedule an appointment with a St. Louis Bankruptcy Attorney.