Reaffirmation is a key component of a Chapter 7 bankruptcy case, usually affecting your home or car. You decision is a critical one, and may affect you for years after your bankruptcy case is discharged.
What is reaffirmation?
Technically, a reaffirmation is a “re-promise.” In the context of a bankruptcy case, I tell my clients that it is:
A promise to repay the balance of the debt under terms that are negotiated between the creditor and the person who filed for bankruptcy. Those terms are usually the same as the original loan, but may from time to time be changed if everyone agrees.
When you reaffirm a debt, you are no longer protected by the discharge in bankruptcy. If you fall behind on the loan after case is finished then the creditor can not only repossess the property, but you can be held legally liable for the deficiency.
How long do you have to take action?
Once you file a Chapter 7 case you have 30 days to file what is called a “Statement of Intention” concerning any debts that have secured claims against them (usually a car or home). This tells the court what you intend to do about those debts and the property, and it guides your actions from that moment on.
Once you have your meeting of creditors, you get 30 days to do what you said you were going to do in the Statement of Intention. If you don’t then the automatic stay terminates and the creditor can take whatever steps it deems necessary with respect to the property.
Change your mind about that reaffirmation agreement?
If you sign a reaffirmation agreement with a creditor, you can revoke it up to the time the court issues your discharge. But if you make the wrong choice and don’t take action in time, you’re going to be bound by that agreement until the debt is paid in full.
The bottom line? Don’t enter into a reaffirmation agreement lightly, and always speak with your lawyer before signing on the dotted line.
This photo of Di Fara Pizza in Brooklyn (which is the best pizza in New York City, by the way), courtesy of akuban.
Check Out These Related Posts:
