Before a bankruptcy or during it, your creditors may encourage you to reaffirm your debt with them. When you reaffirm a debt, you are carving that debt out from the bankruptcy and re-obligating yourself with the creditor. The debt will survive the bankruptcy. Reaffirmation requires that you sign a new contract with that creditor, which means that if you fail to pay that debt in the future, after the bankruptcy, the creditor can sue you or come after the property.
The General Rule
Generally speaking, it’s not a good idea to reaffirm a debt in bankruptcy. If the debt is a bad deal before the bankruptcy, it’s going to be a bad deal after the bankruptcy. Cars are the noted exception to this rule, but even car companies do not always require a reaffirmation agreement be signed.
It’s understandable that most of us want to keep our car in a bankruptcy. Every car company is different when it comes to reaffirmation. Honda will typically allow you to keep the car as long as you keep making payments. Ford will require a reaffirmation agreement. Your bankruptcy attorney can tell you whether you can keep your car in bankruptcy which companies require reaffirmation, and how best to negotiate the process.
Making a Practical Decision
If you want to file bankruptcy and the only way to keep the property in question is to reaffirm the debt, AND you feel comfortable that you can make the monthly payment, there is not much risk in reaffirmation. It is advisable to have your attorney attempt to negotiate the best terms for you prior to signing—the lender is in a bad position here and often is willing to listen to an argument that the balance on the loan should be lowered.
Getting Available Help
Financial decisions can be confusing. The good news is you have help in the many bankruptcy attorneys in your area. They are informed and eager to help you consider the options. If you are in or near Charlotte and would like to speak with me about your options regarding a vehicle or any other property or debt, please email me or call 704.749.7747 to talk to me today.