Reaffirmation Agreements

When filing for bankruptcy, debtors are faced with number of very important decisions.  Some of the most important decisions made pertain to what they are going to do with the property they own.  Through bankruptcy debtors can choose to surrender property without any penalties and without facing any deficiencies; This even applies to property that has a remaining loan balance on it.  Conversely, debtors are also able to keep property, or retain it; they can even keep property that has a remaining loan balance on it.  Most often, debtors decide they need to keep their cars or homes.  If a debtor chooses to keep certain property with remaining loan balances, many times the lender will require the debtor to sign a reaffirmation agreement.

Reaffirmation agreements are a voluntary agreement between the debtor and a lender that must be filed within sixty days of the meeting of creditors, or before the case is closed.  A reaffirmation agreement is basically stating that they debtor is agreeing to continue to make payments on the item as they would have if they did not file for bankruptcy. In other words, the debtor will be making payments in accordance with the terms of the original agreement.  If a debtor chooses to sign a reaffirmation agreement, he or she is completely responsible for the particular debt.  Once a debtor signs a reaffirmation agreement, they still have the option to rescind the agreement within sixty days of when it was filed. 

Deciding to sign a reaffirmation agreement is a very important decision, and there are many factors that debtors should consider when doing so.  If you are desperately wanting to keep certain property that has sentimental and/or practical value, like a house or a car, a reaffirmation agreement will allow you to do so.  However, debtors need to take into account whether or not they can actually afford to make payments on those properties.  If a debtor signs a reaffirmation agreement and consequently cannot make payments, he or she can find  his or her self back in financial trouble once again.  A reaffirmation of a debt will essentially eliminate the fresh start aspect of Chapter 7 bankruptcies.  If debtors are unsure if they can make the payment, or think they might be able to scrape by to make them, they should really think about if it is worth it.  Some debtors might think that they will not be able to find another lender who will help them finance something like a car post filing; however, there are lenders that actually specialize in helping people who have filed for bankruptcy. 

Additionally, debtors should also consider other financial aspects of a reaffirmation agreement.  By signing a reaffirmation agreement, the debtor will incur attorney’s fees, fees from the lender that their debt is through, and they will still have to pay their monthly bill for the property. 

If you are filing for bankruptcy and are interested in reaffirming your property, contact a St. Louis Bankruptcy Attorney today!

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