Articles Tagged with Reaffirmation Agreement

Secured debts are debts that have some sort of property pledged as security. When you get a loan to buy a car or a house, you take out a secured loan.  The car or the house is the security or collateral for the loan.  Secured debts can either be wiped out in a Chapter 7 bankruptcy or not – you have a choice with secured debts.  You can keep the car, house, or property and continue to pay the debt or you can give the property up and walk away, owing nothing.

A secured loan creates two obligations for the loan.  The first obligation is the security interest that allows the lender to repossess or foreclose the property if you stop making payments.  The second obligation is your obligation to pay the loan.  If the car is repossessed or the house is foreclosed, the loan company can come after you for the money you still owe on the loan.  This is known as the deficiency balance.  Chapter 7 bankruptcy eliminates your personal obligation to pay the loan and if the property is repossessed or foreclosed, the company cannot come after you for the deficiency.  If you choose to continue paying and retain the car, house, etc – the creditor provides what is called a Reaffirmation Agreement.

In chapter 7 bankruptcy cases you may be asked to sign a reaffirmation agreement for a loan, secured by collateral, that you wish to keep such as a vehicle, furniture, etc. A reaffirmation agreement is an agreement that says you want to keep the vehicle or the furniture and you will continue to pay the debt after the bankruptcy is over.  The creditor must agree to the reaffirmation, but in most cases they will agree because they want you to keep the property and continue to pay them.  They don’t want the property back.

A valid reaffirmation agreement places a legal obligation over you to continue to pay a debt that would have been wiped out in the bankruptcy.  If you become behind on payments after the bankruptcy, the creditor can repossess or foreclose on that property and sue you for the deficiency balance on the loan.

The Bankruptcy Code has many requirements that must be met for reaffirmation agreements to be valid. You should think long and hard about whether to reaffirm a debt and discuss options with your bankruptcy attorney, as this limits the benefits of your bankruptcy discharge.

credit cardsCan you pay your credit cards after filing bankruptcy?  Of course. You can pay anyone you want to pay. But should you? Let’s explore whether first of all you can keep them, and second if you have anything to gain by paying debts that were wiped out by the bankruptcy court…

Can you keep your credit cards after filing bankruptcy?  You should know that your credit cards will be canceled by the creditor once you file bankruptcy.  Even if you want to keep them and continue to pay, they will be canceled.  Credit card companies are constantly checking your credit reports and the moment they see the bankruptcy they will cancel the card.  This is a surprise to many people who thought that by not listing one or two cards in their bankruptcy, they could keep using them.  No company is going to let you keep a credit card. They all want you to reaffirm the debt and pay it off, but they will not extend the current credit privileges, even if you agree to pay what is owed. Now after filing bankruptcy, you may get flooded with new offers for credit cards (some offers may even be from the same companies!) but they will not allow the current account to remain open.

Why? Once a debt is discharged in bankruptcy, the creditor can’t have any contact with you. No letters, no phone calls, no law suits, no efforts to collect, and no reports to the credit bureau. You can sue them if they violate these rules. So if you repay the debt, the creditor can’t and won’t report it on your credit record. They will take the money, but you won’t any recognition or credit for paying it.

Yes and No. In most cases as long as you are up to date on your house payments you can keep your home. If you are not current, the bankruptcy filing protects the home from foreclosure and this could give you the time you need to get caught up, if you were only a couple of months behind.

If you arehouse significantly behind on your house payments, then a chapter 13 is the only way to go if you want to save your home. The most important thing is to file the bankruptcy as soon as possible so they don’t foreclose on your home. Both a chapter 7 or 13 bankruptcy filing stops foreclosure.  The mortgage company would have to then get permission from the bankruptcy court to start the foreclosure process up again.  It’s important to meet with an experienced bankruptcy lawyer to lay out a proper strategy for dealing with your debts in a way that protects the property you wish to keep.

 

VehiclesYes and No.  In most cases as long as you are up to date on your vehicle payments you can “reaffirm” the debt and keep your vehicle. The finance company has to agree to allow you to keep the vehicle and they will always agree if you are current.

If you are not current, the bankruptcy filing protects the vehicle from being repossessed and this could give you the time you need to get caught up. Most finance companies do not want the vehicle back, so if you are a behind they will give you a chance to catch up or they can redo your payments. The most important thing is to file the bankruptcy as soon as possible so they don’t repossess the vehicle. They hardly ever negotiate before you file the bankruptcy because they don’t believe you will actually file. After you file and they are faced with getting no money and maybe having to take the vehicle back, they can be more lenient and easier to deal with.