What Does It Mean To Reaffirm A Debt?

If you file a Chapter 7 and you have a secured debt, often times a car note or a mortgage, you will be asked by the creditor to reaffirm that debt. What does that mean?  When a Chapter 7 debtor reaffirms a debt they agree to continue paying that obligation even after their bankruptcy case is discharged.  If a debtor wants to keep their car after filing a Chapter 7 they must reaffirm the debt or the car creditor can repossess the vehicle after a certain amount of time has passed.  

The reaffirmation agreement will be sent to your attorney after the filing of your bankruptcy case.  The agreement will list the amount you are reaffirming on the loan, the annual percentage rate, a listing of the collateral you are reaffirming and the repayment terms under the agreement.  Often times the monthly payment and interest you were paying before the filing of the case will not change at all with the signing of the reaffirmation agreement.  

Once the agreement is received by your attorney they will have you come into the office and go through your current monthly income and expenses to ensure that you can afford to continue to pay for the vehicle.  The attorney will make sure the reaffirmation of the debt is in your best interest and will advise you of the legal consequences of putting your signature on that agreement.  Once a reaffirmation agreement is signed and filed with the court, the client has a new legal duty to pay that debt set forth in the agreement.  If you choose to surrender, or give back back your secured collateral, that is completely within the grounds of the bankruptcy.  If this happens you will not be responsible for the debt as long as you have not signed the reaffirmation agreement and you get a discharge in your bankruptcy case.  

The decision to affirm or not to reaffirm a debt is an important one and could have both positive and negative effects on re-establishing your credit.  An experienced bankruptcy attorney can be very helpful in guiding you through this process.  We offer free consultations at 6 different locations in both Illinois and Missouri.  If you would like to schedule a consultation please give us a call at 636-916-5400 or visit our website at http://www.lickerlawfirm.com.