What does it mean to reaffirm debt?

During bankruptcy, to reaffirm debt means that you will continue to make payments on a loan in order to keep the asset. Many Arizona residents filing for bankruptcy will reaffirm debt for a home mortgage or car loan. While it is possible to reaffirm debt during a Chapter 7 bankruptcy filing, it is common to retain items and continue to pay secured debt with a Chapter 13 bankruptcy filing.

Filing for bankruptcy in Arizona is meant to relieve an overwhelming debt burden. Therefore, reaffirming a debt – keeping a debt – after the bankruptcy filing should be carefully considered. An experienced bankruptcy lawyer will help you determine whether reaffirming debt is in your best interest.

Debts can be reaffirmed in Chapter 7 bankruptcy only if it is deemed truly necessary. For example, a car loan could be reaffirmed for an automobile that is the only viable means of transportation to and from work.

In Chapter 13 bankruptcy a secured debt can be repaid only if the payments can be managed in the overall scheme of the repayment plan. For example, you usually will keep a home when the mortgage payments can still be made together with the total payment for the Chapter 13 repayment plan. The same is true for car payments.

A reaffirmed debt would still be subject to collection, repossession or foreclosure if the payments are not kept current. Knowing that you can truly afford the debt in the overall picture of your financial health is the most important consideration before you reaffirm debt in any of the Arizona bankruptcy chapters. You will want to discuss any reaffirmation decisions with a bankruptcy attorney before you file for bankruptcy in the State of Arizona.