If you are filing for Chapter 7 bankruptcy, it’s imperative to understand how this process works. Unfortunately, one aspect that many are unaware of is that, in order to wipe out the accumulated debt, some assets may be liquidated. Additionally, any secured property may be reclaimed by the creditor. If you are hesitant to pursue this option for fear of losing your property, you may want to explore whether or not reaffirmation agreements are right for you. The following blog explores these matters in further detail so you can determine the best option for your case. Additionally, you’ll discover the importance of working with a Memphis, TN Chapter 7 bankruptcy lawyer to explore your legal options.
What Are Reaffirmation Agreements?
When you file Chapter 7 bankruptcy, you’ll find that this process entails the liquidation of your assets to repay creditors. Typically, these assets are non-exempt, meaning they are not granted protection under state or federal laws. At the end of your case, all remaining eligible debts will be discharged. In many instances, your secured debt, which is any debt that has collateral property attached, like an auto loan or mortgage, can be discharged.
Reaffirmation agreements are legally binding contracts that can be made during bankruptcy, allowing the debtor to recommit to paying a debt that they would otherwise have discharged at the conclusion of their case. It’s imperative to understand that this is generally only an option during Chapter 7, as the Chapter 13 repayment plan can help you get caught up on your secured debts.
Why Would I Need to Reaffirm a Debt?
As mentioned, reaffirming a debt means that you will voluntarily commit to making payments on a debt, even though it could have been discharged during the bankruptcy process. Generally, the most common reason someone may choose to reaffirm a debt is to keep the property. As mentioned, secured debts have collateral, and when they are discharged during bankruptcy, the creditor can reclaim the property. This generally concerns vehicles and properties. By signing the agreement, you can retain the property and continue to make payments.
Another common reason that someone may want to reaffirm a debt is if they have a co-signer. When someone co-signs a debt for you and then you file for bankruptcy, the debt will be discharged, meaning you have no legal obligation to continue paying it. However, this means the creditor can go after your co-signer for the debt in your name. As such, if you want to protect your co-signer, you may want to reaffirm the agreement.
If you are considering reaffirming a debt, it’s imperative to discuss these matters with an experienced attorney first. They can assist you in determining if this is a good decision.
When you are in debt and looking to file for bankruptcy, working with an experienced attorney from the Arnold Law Firm is in your best interest. We understand how difficult these matters can be to navigate on your own, which is why our firm is committed to providing you with the best possible representation. When you need help, our dedicated legal team is ready to assist you.
