What Are Chapter 7 Bankruptcy Reaffirmation Agreements?
After you file a Chapter 7 bankruptcy, you may be asked to sign a reaffirmation agreement by a creditor holding a loan secured by your home or motor vehicle.
If you sign a reaffirmation agreement, you are agreeing that you will continue to be obligated to make your payments on a particular loan, even though you filed bankruptcy and received a discharge. This means that, if you default on this loan in the future, the creditor may not only recover the collateral for your loan and sell it, but they may also take you to court seeking a deficiency judgment, if the collateral does not sell for a sufficient amount to pay off your loan.
We generally discourage bankruptcy clients from reaffirming a vehicle loan for more than the vehicle is worth. However, we understand that, in many situations, clients desire to keep a vehicle even though the loan amount exceeds its value because of the need for reliable transportation and the fear that another vehicle could not be obtained.
If you sign a reaffirmation agreement, you still have the right to change your mind by “rescinding” the reaffirmation agreement before entry of your bankruptcy discharge order or within 60 days after the agreement is filed with the bankruptcy court, whichever occurs later.
If you don’t sign a reaffirmation agreement, you may still be able to keep your home or motor vehicle if you continue to make all your payments on a timely basis. Generally, a creditor will have no reason to repossess their collateral is your payments remain current.
Learn More By Speaking With A Lawyer
Be sure to discuss reaffirmation agreements with your bankruptcy lawyer to get his advice regard whether to sign a reaffirmation agreement.
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