What Does It Mean To Reaffirm A Debt?

There are a lot of misperceptions about bankruptcy, and one of the most common is that you can file a case and keep property you owe money on without making payments. However, that is not the case and if you are considering filing for bankruptcy it is important to understand how it works and what types of obligations remain even after you file.

Debt in Bankruptcy

Debt is treated one of a few ways in a bankruptcy; it can be discharged, reaffirmed, and sometimes repaid at a lesser amount than what your statement balance shows. For now, we will focus on what it means to reaffirm a debt. A reaffirmed debt is a debt that remains due and owing even after your case is complete. When you reaffirm a debt you sign a reaffirmation agreement that sets forth the repayment terms. This agreement acts like a brand new contract. What this means is that you are obligated to make the payments, even after your bankruptcy case is over. Because the purpose of filing bankruptcy is to eliminate debt, you are probably wondering why anyone would ever agree to sign a reaffirmation agreement.

Reasons to Reaffirm a Debt

• The reaffirmed terms may be at a lower interest rate, or a reduced balance. This is beneficial because it results in a more manageable payment, one that is more in line with your budget. In order to get this result though, your attorney does have to engage in negotiations with the creditor in question, or the creditor’s attorney.
• Your lender is still permitted to communicate with you about a reaffirmed debt after your case is over, but that is not so when a reaffirmation agreement is not signed. Being able to talk to your lender about your loan is helpful, especially if you are having problems making payments and need and extension or some other form of assistance.
• Reaffirming a debt can help repair your credit faster, especially if you make the payments on time.

If you are having a hard time making ends meet, call us now at (916) 485-5444 or use the contact us on our website to schedule your free attorney consultation. We will explain your options, and help you make a decision about your debt that makes sense for you.