If you have secured debt on personal property you want to keep and you’re filing a Chapter 7, you may need to sign a reaffirmation agreement.
Reaffirming a debt is to agree that you will owe the debt after the bankruptcy case is over. So not only can the creditor repossess its collateral, it can also collect directly from you. Essentially, it’s as though you “did not include” that particular debt in the bankruptcy.
For example, if you owed $18,000.00 on your car before you filed, your payments were $345.00/month and your interest rate was 7.8%, signing a reaffirmation agreement typically agrees, again, to pay at those same terms. Occasionally, it is possible to get a lower interest rate when a debt is reaffirmed, but that is rare.
A vehicle must be reaffirmed to ensure you can keep the vehicle.
Before signing, make sure that you are willing and able to continue making the payment. You should only reaffirm a debt when you must AND you are relatively certain you’ll be able to make the payments. Reaffirmed debts are usually reported on your credit report, and a good payment history on a reaffirmed debt can be essential to rebuilding credit. Collum & Perry will assist you in making sure the reaffirmation is completed correctly, signed, and submitted to the Court. An attorney can only sign the reaffirmation agreement if it appears likely that you can afford to make your payments.
Collum & Perry DOES NOT recommend that you reaffirm a debt on a home. Additionally, bankruptcy judges in the Western District of North Carolina discourage reaffirmation agreements because they make a person personally responsible for a debt that can often become a huge burden. Some attorneys refuse believe that reaffirming a mortgage is malpractice. If a bank has insisted that you should have signed a reaffirmation agreement, simply tell them that mortgages are generally NOT reaffirmed where you filed bankruptcy. If you need the mortgage payments to be reported on your credit report, find out how to do so here.