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What is a Reaffirmation Agreement?

Posted by Cha'Ron Ballard on June 3, 2019

What is a bankruptcy reaffirmation agreement?

One of the main benefits of filing for a Chapter 7 bankruptcy is the ability to discharge or “wipe out” your debts when your financial situation has become unmanageable. This gives a lot of hope to many people who feel overwhelmed by their finances. However, as a part of a Chapter 7 bankruptcy, certain assets of value will be liquidated to cover the costs of your debts. Items with outstanding loans will be returned to the creditor.

While a Chapter 7 bankruptcy can be beneficial for your financial situation, there may be certain assets that you wish to keep rather than have liquidated or returned to the creditor. It is possible to keep these assets by signing a reaffirmation agreement.

Bankruptcy Reaffirmation Agreement

Simply put, a reaffirmation agreement is a voluntary agreement between a person filing for a Chapter 7 bankruptcy and a creditor—in this agreement, the debtor agrees to continue paying a specific debt that would otherwise be dischargeable in a bankruptcy. As a result, the debtor gets to keep their property, rather than surrender it to the creditor or bankruptcy trustee to be liquidated. These types of agreements most commonly occur with vehicles but can also be used to keep other property such jewelry, furniture, or electronics.

Some people may wonder why a bankruptcy filer would ever want to sign a reaffirmation agreement rather than just getting rid of their debt. However, it may be important for a filer to keep certain assets as they move toward a more stable financial situation. For example, signing a reaffirmation agreement for a car may be a good idea when filing for bankruptcy because then the filer can still get to work and take care of their family. In this situation, signing a reaffirmation agreement and reaffirming the debt can prevent repossession of the filer’s car by the creditor or trustee during bankruptcy.

After signing a reaffirmation agreement, the debtor is obligated to pay the debt. This means that even if the debt could have been discharged through the bankruptcy, the debt remains the debtor’s responsibility. The debtor must first become current on the loan—this means if they are behind in their payments, they must pay any late payments first. Then, the debtor must continue making on-time payments to avoid defaulting and repossession of the property. Because of this, it is very important to consider whether or not you will be able to continue making the payments before signing a reaffirmation agreement—if the payments on the property are too high, it may be a better idea for your financial situation to allow the property to be liquidated or repossessed.

Atlanta Bankruptcy Legal Help

When faced with the decision to sign a reaffirmation agreement, speaking with an experienced bankruptcy attorney is a good idea so you can get direction on the best option for your personal situation. At The Ballard Law Group, we are ready to help you navigate the bankruptcy process from start to finish. If you are facing an overwhelming financial situation, and need your questions about reaffirmation agreements or anything bankruptcy related,  reach out to the experienced Atlanta bankruptcy attorneys at The Ballard Law Group today for a consultation by calling 404-220-9906.

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