When you file for bankruptcy, it can be an incredibly confusing and overwhelming time, as you’ll likely have a considerable number of concerns about your property and whether or not it will be seized to pay back creditors. In many instances, property is protected. However, if you have a debt with collateral, understanding whether or not a reaffirmation agreement is right for you is critical. The following blog explores what this agreement is and how a Memphis, TN Chapter 7 bankruptcy lawyer can help you determine if it’s in your best interest to sign one.
What Is a Reaffirmation Agreement?
When you file for Chapter 7 bankruptcy, you will be assigned a bankruptcy trustee. This person is responsible for liquidating your assets to repay creditors. In some instances, your property may be seized to pay off certain debts. While you can utilize some exemptions to protect your property, you may also choose to enter a reaffirmation agreement with the original creditor.
Essentially, if you have a secured debt, meaning you have property as collateral, and do not meet the requirements to retain this property, it can be seized during Chapter 7 bankruptcy. For example, your home is collateral for your mortgage payments. If you are behind on payments and have a lot of equity in your home, for example, the courts may require you to sell it to repay your debts. However, entering a reaffirmation agreement allows you to keep the asset in exchange for agreeing to pay the debt. As such, the asset will be removed from your bankruptcy estate.
It’s also important to know that you will still be responsible for making payments for a reaffirmation agreement regardless of what happens. For example, if you sign an agreement to keep your car but total it, you will be responsible for continuing to make payments on the vehicle even though you no longer own it.
When Should I Sign the Agreement?
It is imperative to understand that you should not enter a reaffirmation agreement without first consulting an experienced attorney who can determine if this is in your best interest. Unfortunately, many people are enticed by the promise of keeping their home or car that they sign the agreement without knowing if they truly can afford to enter this agreement. If you cannot make payments, you will lose the assets.
If you and your attorney have discussed signing and have decided it is in your best interest to do so, you will be able to sign any time before the discharge of the debt. As Chapter 7 can be a relatively short process, it’s important to consider whether or not a reaffirmation agreement is right for you long before the discharge date.
At the Arnold Law Firm, we understand that determining whether or not this is right for you can be incredibly complex. That’s why our firm is here to help. We can examine your circumstances to help advise you on whether or not a reaffirmation agreement is right for your circumstances. Connect with our team today to learn how we can assist you in these matters
