Filing a Chapter 7 bankruptcy can rid you of all your unsecured debts, and it also gets rid of your secured debts if you wish to surrender the property. For example, if you have a car loan that you cannot afford, you can surrender the car in a bankruptcy and get rid of the car loan debt. On the other hand, if you are current on your car payments and you want to keep the car, you can reaffirm the debt by signing a reaffirmation agreement with your car loan lender. This means you “reaffirm” your intent to repay the loan.
The reaffirmation agreement is, according to the United States Bankruptcy Code, an agreement between you and the creditor in which you agree to waive the discharge of that particular debt in your bankruptcy, and you also agree to keep making your payments to the lender. Signing a reaffirmation agreement is voluntary, but most lenders will require that you sign a reaffirmation agreement if you want to keep the car or other secured property.
How Do I Get a Reaffirmation Agreement?
When you file your bankruptcy petition, you indicate on Schedule D whether you want to surrender or retain the secured property. After lenders get notice that your bankruptcy was filed, they usually just and send a reaffirmation agreement if you indicated that you want to keep the property on Schedule D of your bankruptcy petition.
When Should I Sign the Reaffirmation Agreement?
The window of time in which you may sign a reaffirmation agreement is between the time you filed your petition and the time your bankruptcy ends with your discharge, which is usually about four months. The lender must file it with the court while your bankruptcy case is still open. It will be too late to sign the reaffirmation agreement after you get your bankruptcy discharge, and the bankruptcy is over. At that point, if you were unable to sign one (perhaps because the lender neglected to send you one) the lender may still allow you to “retain and pay” without a reaffirmation agreement. However, some lenders will not allow you to retain and pay, and they will seek to repossess the property. You may also notify the bankruptcy court clerk to delay your discharge if you need more time to sign a reaffirmation agreement.
Carefully Consider Your Situation Before Signing a Reaffirmation Agreement
If you fail to make your payments after signing a reaffirmation agreement, the lender will still have the option to take the property through repossession. You will also be on the hook to pay that debt despite your bankruptcy. Therefore, before you sign a reaffirmation agreement, you should carefully consider whether you can actually afford to make the payments. If you are currently behind on making your loan payments, you probably should not reaffirm the debt.
What if You Change Your Mind After Signing the Reaffirmation?
If you already signed a reaffirmation agreement, and you changed your mind and no longer want to make the payments to keep the property, you can cancel it before the deadline passes. To cancel (rescind) the reaffirmation agreement, you must do this before your discharge occurs, or sixty days after the agreement was filed with the court, whichever is later. You may cancel it by sending written notice to the lender and to the court indicating your intention to revoke the reaffirmation.
Reaffirming a Loan That Has a Cosigner
Another reason you may want to sign a reaffirmation agreement would be if you have a cosigner on your loan. Signing a reaffirmation agreement with the lender would prevent the lender from going after your cosigner to collect the debt.
Contact Starks Law Debt Defense Attorneys To Learn More About Chapter 7 Bankruptcy Relief
If you need debt relief or have questions about Chapter 7 bankruptcy relief, contact us at Starks Law P.C. for a free consultation with an attorney. We listen to the needs and goals of every client and create a legal strategy tailored to that person and their case. We do not believe in the 'one size fits all' legal strategy employed by other firms. Every case is unique, and we plan accordingly.
Representation from Starks Law begins with a simple phone call. We will review the circumstances surrounding your unique situation. After assessing the details, we will form an action plan tailored specifically for your case and goals. Additionally, we will do our best to answer any questions you may have so that you can make a fully informed decision on how to proceed. Take advantage of our Creditor Lawsuit Defense services.