What Is Reaffirmation Of Debt In Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a popular branch of bankruptcy, as it offers a lot of key benefits to those who file. If you are considering filing for this branch, you should fully understand the risks you take if you file as well as the benefits it will offer you. You should also understand what reaffirmation of debt means in this branch of bankruptcy. Reaffirming a debt may be something your lawyer suggests doing in your case, and here are a few things to understand about it.
What it means
When you decide to use Chapter 7, you are basically trading off any assets you have for a discharge of debts. Fortunately, most people do not lose too many assets when they file for Chapter 7, but they do end up receiving a discharge of debts. If you have an asset that you have a loan on, you can choose to keep this asset when you file for Chapter 7. To do this, though, you would need to reaffirm the debt.
Reaffirming the debt means that you will sign an agreement to continue making the payments on the debt. If your lender approves it, you can keep the asset as long as you continue paying for it.
What you can use it for
The two most common things people use reaffirmation of debt agreements for are homes and cars. To reaffirm a car loan, you would have to create a reaffirmation of debt agreement for the car loan, and you would need to sign it and send it to the lender for approval. If the lender agrees, you can keep the car and continue making the payments. You can use this same process to keep your house, too.
The qualifications for using reaffirmation of debt
To qualify for a reaffirmation of debt, you will need to be caught up on your payments. In other words, lenders typically will not sign these agreements unless the person is not behind on the payments. If you are behind on the payments and want to keep the asset, you would first have to pay off the past-due balance. Then, you could send the agreement to the lender and hope that they accept it.
It is important to fully understand what reaffirmation of debt means before you do it in your Chapter 7 case. A bankruptcy lawyer like Todaro David M Co LPA can help you understand it if you still have questions.