What Does it Mean to Reaffirm a Debt During Bankruptcy?

Filing for bankruptcy means that you will be relieved of an overwhelming debt burden, but in the process you may forfeit certain assets. To retain a major asset such as a car, the debt often needs to be reaffirmed through the bankruptcy court. To reaffirm a debt signals that you want to continue making payments on the account and continue to keep the asset. Deciding to reaffirm debt is a serious consideration for bankruptcy, including whether you would be best served to file Chapter 7 bankruptcy or should consider filing Chapter 13 bankruptcy. The bankruptcy attorneys at Radix Law in Phoenix, Arizona, are experienced in helping clients decide which bankruptcy filing is best for their circumstances, and whether or not a debt should be reaffirmed.

Reaffirmed debt agreements are for secured debts such as automobile loans, and sometimes retaining the asset through Chapter 7 bankruptcy must be a true necessity. For example, an automobile might be the only viable means of transportation to a job. Knowledgeable bankruptcy lawyers can help you determine if an asset would be deemed necessary, and therefore considered for reaffirmation.

Part of determining whether to reaffirm a debt is whether or not you can manage the payments. The bankruptcy court will not consider a reaffirmation plan unless the debtor can prove that continued payments are feasible. Since a reaffirmation of debt is a new contract between debtor and creditor, the terms of the contract may be open to negotiation. An experienced bankruptcy attorney will be able to discuss all your options with you, including possibly purchasing a new vehicle or redeeming the property with a lump sum payment.

Reaffirmed debts are not included in the bankruptcy discharge. Once the debt is reaffirmed, the creditor will treat the debt as though no bankruptcy exists. That means that the creditor can take any collection actions necessary if payments are missed, including repossession, and you would not be protected from these action by the court.

To decide whether or not to reaffirm a debt, consult with a qualified bankruptcy lawyer that can help you weigh the benefits.

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