If you file for bankruptcy Chapter 7, the issue may arise of a Reaffirmation Agreement. What is it?
The Reaffirmation Agreement will be typically for an auto loan, sometimes a mortgage. It is an agreement with the creditor that you will keep the property, continue to make payments on the loan, and the creditor will not repossess it.
The agreement needs to be signed and filed with the court prior to your discharge.
Consequences of a Reaffirmation Agreement
When you sign a reaffirmation agreement, you are agreeing to continue to make payments on the secured property. The Reaffirmation Agreement works as a waiver of including that debt in the bankruptcy which is dischargeable.
As a result, suppose you signed a reaffirmation agreement on your car or mortgage, and a few years after the bankruptcy, you can no longer afford to make the payments. As a result, your car is repossessed or foreclosure proceedings have begun on your home.
The creditor will sell your car or home at an auction and whatever money is gained, will be applied to your debt, but if the sale iasn’t enough to cover the original balance, you would owe the difference (deficiency balance) because you signed the Reaffirmation Agreement.
Now, the creditor can sue you again and you cannot file for bankruptcy chapter 7 again until after eight years that you received the original discharge.
Looking for a fresh start financially? Contact attorney Alex Hernandez for your free consultation.
Representing clients in the areas of Chapter 7 Bankruptcy, Family Law/Divorce, and car and motorcycle accidents for 20 years.
(904) 712-5565 or (305)-688-LAWS (5297).
*Se Habla Español