Reaffirmation During Bankruptcy Essay

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Recommended: Chapter 7 vs Chapter 13 bankruptcy: Pro's and Cons

Filing for bankruptcy can provide you with relief from overwhelming debt. That being said, there are certain types of debts, such as a vehicle or home loan, you may want to reaffirm. Reaffirming will allow you to retain your property so long as you continue making payments on the debt. However, signing such an agreement may not be in your best interest. Below, a Florence, KY bankruptcy attorney from Monohan & Blankenship Attorneys At Law discusses the basics of reaffirmation during bankruptcy.

What Is Reaffirmation?
Reaffirming a debt excludes that debt from your bankruptcy. As such, your personal liability for the debt will remain intact after filing. For example, if you owe $10,000 on a vehicle prior to Chapter 7 bankruptcy, you will still owe $10,000 to the creditor under a reaffirmation agreement. If the vehicle is repossessed due to …show more content…

In some cases, you may even be able to renegotiate the loan to reduce your monthly payments, interest rate, and total debt amount.

Disadvantages
Reaffirming a debt during bankruptcy leaves you personally liable for that debt. As such, if your property becomes damaged or destroyed following reaffirmation, you are still required to make payments. Furthermore, if you default on the agreement and your property is repossessed/auctioned off, the creditor will be able to sue you for the outstanding balance. Since you will be ineligible to file Chapter 7 for another eight years, you’ll be stuck paying off the balance for the foreseeable future.

By contrast, if you choose to discharge that debt, your creditor will be unable to come after you for the remaining balance, regardless of the amount. Your personal liability for the outstanding debt will have been wiped clean by your Chapter 7 discharge.

Should You

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