In Chapter 7 Bankruptcy, a client has a choice to make about secured debts, usually his or her car loans and mortgages. “Do I keep them or walk away?”
The process to keep a debt and have it survive a Bankruptcy is called “reaffirming a debt” by signing a so-called Reaffirmation Agreement. This is a voluntary agreement that must be signed by both the debtor and the creditor.
A reaffirmation agreement is essentially a waiver. It tells the judge the following: “Even though I am in Bankruptcy and I could walk away from this debt and never pay a single dime, I am electing NOT to do that. Instead, I am telling the whole world that I like this debt and intend to pay it back so that I can keep my car forever. I understand that I must pay this debt on time and in full even if the car breaks down or if I lose my job, and I cannot go back and file another Bankruptcy if I change my mind. I understand that by signing it, I stand to lose my car and a future lawsuit for money if I ever miss a payment.”
Because a Reaffirmation Agreement is so serious, I recommend a visit with an attorney to discuss this option and what it entails. In many cases we assists clients in Chapter 7 Bankruptcies with strategies to retain their cars while avoiding signing a reaffirmation agreement.
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