Chapter 7 bankruptcy can be a devastating blow to you and your loved ones. During Chapter 7, it is possible to lose a number of items in your home; including beloved property that may have a sentimental value that is through the roof. There are a variety of different options you have where you may be able to keep certain items or property during Chapter 7. One of those possibilities is filing for a reaffirmation agreement. This brief article will go over some of the ins and outs of reaffirmation agreements and hopefully help you come to a decision regarding whether or not such an option is right for you.
What Is It?
Chapter 7 essentially liquidates your assets and absolves you of your debt. However, there are certain cases where you can hang onto debt. Reaffirmation agreements allow you to hold on to certain debts for certain objects, allowing you to keep that piece of property. In a way, reaffirmation agreements are sort of like you never filed for Chapter 7 at all (at least on certain property).
For example, let us say you owe approximately $10,000 on your car before bankruptcy. If you decide to sign a reaffirmation agreement on the car, then you will actually still continue to owe money on the car, but you will also be allowed to keep it in your name. If you are unable to keep up with payments, however, a creditor is well within their legal rights to sue you.
When Can I Do It?
Basically, you can file for a reaffirmation agreement at anytime during Chapter 7 bankruptcy proceedings. However, there is no monolithic reaffirmation agreement. For every item that is to be repossessed under Chapter 7 stipulations, you will have to sign a reaffirmation agreement in order to potentially hold onto the property. For this reason, you may want to take into consideration which items you want – and which items you can afford – to keep under the clauses of a reaffirmation agreement. There might be certain items that hold a certain place in your heart that you may want to keep over your brand new sports car.
Why Should I Do It?
There is one primary and salient reason why you should consider a reaffirmation agreement. Reaffirmation agreements are a great way to hold onto your property or collateral if you truly do not wish to part with it. So long as you can keep up with the payments, you will be fine. However, remember, if you slip back into old habits that may have forced your hand into Chapter 7 bankruptcy to begin with, the items will be gone, and you will be, potentially, in a bit of legal hot water. It is best to consult with your attorney before making any decisions revolving around reaffirmation agreements.
The fact of the matter is reaffirming your debt may not always be the best course of action. You should only enter into a reaffirmation agreement if you are absolutely positive that you can pay off the debt. If you enter into a reaffirmation agreement, this means that you are entirely personally responsible for that debt. That means it cannot be absolved through filing Chapter 7 again. It also means that you are legally responsible for the debt. As mentioned earlier, a creditor can take legal recourse against you if they deem it necessary.
Although filing for Chapter 7 bankruptcy can be an upsetting process for you and your family, you may wish to discuss reaffirming certain items with other decision makers in your household. If you're confident that you will not default on the loans again, it should be a relatively painless process. Check with a Chapter 7 bankruptcy professional for more information.