When you file a Chapter 7 bankruptcy case, you receive a discharge of most, if not all, of your unsecured debt. This includes medical bills, credit card debt, payday loans and personal finance loans. Alimony, child support, most taxes and most student loans are non-dischargeable in bankruptcy even though they are considered unsecured debts. Secured debts are handled in a different manner in a Chapter 7 bankruptcy. Debtors have several options with regard to secured debt, including signing a reaffirmation agreement.
When Does a Debtor Need to Sign a
When you file a Chapter 7 bankruptcy case, you must file a Statement of Intentions telling secured creditors how you intend to deal with the secured debt. You have several options including surrendering the property to the creditor to receive a full discharge of the debt or redeeming the property by paying the creditor a lump sum payment equal to the value of the collateral securing the debt. Your third option is to sign a reaffirmation agreement.
When you sign a reaffirmation agreement, you are reaffirming the secured debt. If a debtor chooses to reaffirm secured debt, the creditor will prepare a reaffirmation agreement for the debtor to sign. The reaffirmation agreement must contain certain disclosures about the loan including the current balance of the loan, the monthly payment, interest rate and a description of the collateral securing the loan. Once the reaffirmation agreement is signed, it is filed with the court.
Before entering a reaffirmation agreement, the debtor should discuss the agreement with his or her attorney because a reaffirmation agreement restores the debtor’s personal liability for the debt. In other words, if the debtor fails to abide by the terms of the loan at any time in the future, the lender has the right to repossess the collateral, liquidate the collateral to satisfy the debt and pursue a deficiency judgment if the proceeds of the sale of the collateral do not fully satisfy the debt.
The benefit to the debtor is that he or she is allowed to retain the collateral and the creditor will report timely payments to creditor reporting agencies to help the debtor rebuild his or her credit rating. Even though there are benefits when a debtor signs a reaffirmation agreement, he or she should consider the matter carefully and listen to his or her attorney’s advice before making a final decision whether to reaffirm debt.
Contact an Experienced Mount Holly
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
If you are experiencing financial problems due to debt, contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
Latest posts by Travis Richards (see all)
- Should I Use A Loan Consolidation To Solve My Debt Problem? - 08.20.2015
- Best Way to Pay Off Student Loans - 08.18.2015
- What Is Foreclosure? - 08.13.2015