Reaffirmation Agreements
In a nutshell, it is a contract that basically says you are going to pay off a debt that would have otherwise been subject to a discharge under your bankruptcy case. This contract is filed with the bankruptcy court and essentially re-establishes your liability to pay the debt.
Is signing a Reaffirmation Agreement a Good Idea
There aren't that many benefits to reaffirming a loan in my opinion. Many lenders may make you sign one as a condition of keeping the car if you have filed for bankruptcy. It may be worth it if you have a low balance and a low monthly payment and can pay off the car relatively quickly. Sometimes people may want to protect a co-signor (which is typically a family member) by reaffirming the loan so that they can continue to make payments and keep the creditor from pursuing the co-signor. One positive to reaffirmation is that the monthly payment should be reported on your credit report, which may help you reestablish credit.
More often than not, reaffirmation is not a good idea in my opinion. Typically, what you owe on the car will be a lot more than what the car is worth. You are better off trying to see what you kind of car you can get for $1500 to $2500. You now also have to worry about being on the hook for any deficiency judgment that may come as a result of a repossession of the car which had a loan reaffirmed. Generally, under bankruptcy the deficiency would be part of the discharge.
The Law Office of Jeffery M. Haupt is located in South Bend, Indiana and helps people handle family law issues such as divorce, parenting time, child support, paternity, and child custody. The information in this blog should only be used for educational purposes and not be construed as legal advice. Nothing in this blog creates an attorney-client relationship between me and any readers of this blog. No attorney-client relationship is created until you have a document from me saying so. We are a debt relief agency, we help people seek relief using the Bankruptcy Laws.
