Reaffirming Debts

Reaffirming Debts

If you are behind on car or mortgage payments, which are classified as secured debt, and you want to keep the property after filing a Chapter 7 bankruptcy, you may be thinking about a reaffirmation agreement. By reaffirming the debt you owe, you are able to keep your vehicle or personal property recently purchased, provided you are able to make the payments.

However, reaffirmation agreements can be complex. To get all the information you need to make a sound decision, speak to us at The Brooke Law Firm. Our firm has helped thousands of individuals throughout Long Island achieve debt solutions that work for them. Meet with us to discuss your situation during a free consultation.

How Does a Reaffirmation Agreement Work?


Since home mortgages and car loans are considered secured debt, if you have defaulted on your payments, the lender can take the property from you. With a vehicle, it is referred to as repossession . With a home, it is a foreclosure action.

By reaffirming the debt, you are essentially promising the lender that the debt will not be discharged in bankruptcy. It involves entering into a new contract with the creditor for the remaining amount due. There are certain benefits to reaffirming a debt such as being reported on your credit report as being paid which will help you rebuild your credit.

Should I Sign a Reaffirmation Agreement?

If you wish to keep your vehicle you may need to sign a reaffirmation agreement. However, it is important that you understand that entering into that contract will make you personally liable for that debt, despite your bankruptcy relief. Therefore, it is critical that you can afford the payments established in the new creditor payment plan. The payments and interest rate stay the same, and are sometimes even lowered, and you are guaranteed the lender won't take the property as long as you are current with payments.

When the Financial Stakes Are High, Get Professional Advice

Reaffirmation agreements only apply if you file a Chapter 7 bankruptcy, not a Chapter 13 bankruptcy. To determine if you are eligible for Chapter 7 bankruptcy, you must pass the means test. We will meet with you in a free consultation to answer all your bankruptcy questions.
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