Reaffirming Debts After Bankruptcy
Reaffirmation of your debts after Chapter 7 bankruptcy is a promise to pay some or all of the debt you owe to a creditor instead of having it discharged as part of your bankruptcy. This is usually made formal with a reaffirmation agreement, which is an enforceable contract between you and your creditor and is most commonly done for secured debts such as a mortgage or car loan.
You do not need to reaffirm unsecured debt as it is wiped out with the discharge. Unsecured debt does not attach to the property that was purchased while incurring this debt.
Advantages And Disadvantages Of Reaffirmation
If you reaffirm your debt and continue to make payments on time, the creditor will continue to report this to the credit bureaus, which will help improve your credit score more quickly. However, if you miss a payment or make a late payment, this will significantly damage the credit you have made up.
In addition, if you continue to miss payments, the creditor will start harassing you for payment again, and you will not have the power of the automatic stay through bankruptcy to protect yourself, as you can only file for Chapter 7 bankruptcy once every eight years. Most importantly, the creditor can now not only repossess the property (the automobile) they can also now sue you for a deficiency.
If you choose not to reaffirm your debt, it is discharged as part of your bankruptcy and is marked as such on your credit report. If you make future payments on this property, they are not reported to the credit bureaus. When the debt is included as part of the discharge, your creditor can never force you to pay it. This does not mean that you get to keep your house or car for free.
You can continue to make payments and keep your property. However, if you miss payments, your creditor does have the right to foreclose on or repossess that property. Because of the discharge, the creditor is forbidden from coming after you for any deficiency from your loan.
Should I Reaffirm My Debts?
Here at Goldman & Beslow, we don’t always recommend reaffirming your debts after they have been discharged. In many cases, your creditors will let you keep the property if you stay current on payments going forward. Our New Jersey bankruptcy lawyers can help you decide if there are any debts you need to reaffirm after your bankruptcy is completed.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.