Reaffirming your debt - and your intention to repay it - can be an important part of a bankruptcy procedure. Bankruptcy attorney Benjamin Ginter, runs the Law Offices of Benjamin J. Ginter in Cranford, New Jersey. Here, he discusses what reaffirmation agreements are all about.
A reaffirmation agreement is one made by the debtor and the creditor where the debtor agrees to continue paying for the debt even though he filed for bankruptcy and the debt could therefore be legally discharged.
Basically, it is an agreement by a Chapter 7 debtor to continue paying debts after the bankruptcy, in order to keep either collateral or mortgaged property that normally would be subject to being repossessed.
The reason debtors do this is for things like their mortgage or their car finance payments. They want to keep their house, for example. So in order to do that, they sign a reaffirmation agreement, which allows them to keep the asset as long as they continue to pay for them. Such an agreement is usually made when a debtor wants to keep any large piece of secured property, such as a house, car or even an airplane.
When to Sign?
A reaffirmation agreement must be signed prior to the filing of a discharge in bankruptcy and before the debtor receives the disclosures required from his or her creditor, according to the 2005 Bankruptcy Reform Act. No risk is involved unless you know that you will not be able to pay back the debt. In other words, it can be worth signing if you need a vehicle to get you to and from work, but not if you know that eventually you will not be able to pay back the debt.
You can also try to renegotiate your contract, for example, if the vehicle has depreciated in value. Most lenders should be happy to allow you to do this as anything that will get you to pay back at least some of what you owe is an advantage to them.
