The Means to Live: Chapter 7 Bankruptcy and Debt Reaffirmation

June 30, 2012

The Means to Live: Chapter 7 Bankruptcy and Debt Reaffirmation

Even though going through Chapter 7 bankruptcy offers the prospect of financial relief, individuals who file may wish to reaffirm the debt on certain property to be discharged in order to retain it. For instance, it is common for filers to reaffirm the debt of a vehicle because many people depend on their cars to get to work. If a filer decides to reaffirm a debt, he or she should be sure of the ability to repay the loan in order to keep the property.

In a personal bankruptcy case, the filer may decide that keeping his or her car or another piece of property is in their best interest. For example, it may be harder to get to work if the filer's main mode of transportation is lost during bankruptcy. If a filer decides to retain a certain piece of property, then he or she will need to reaffirm the associated debt with that property.

A reaffirmation is an agreement between the debtor and creditor in which the debtor will remain liable for the loan and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in bankruptcy. The reaffirmation agreement also outlines duties for the creditor as well. The creditor promises to not repossess or take back the property subject to the reaffirmation agreement as long as the debtor makes payments on the debt.

In order to reaffirm a debt, the filer must create a reaffirmation agreement with the creditor before the discharge of that debt is entered. The debtor must sign the written reaffirmation agreement and file it with the court, and there are certain requirements that the reaffirmation agreement must reflect.

Among the information to be disclosed, the agreement must explain the amount of the debt being reaffirmed, how the debt is calculated, and that the debtor is still personally liable for the debt. In addition, the agreement also requires the debtor to file a statement about his or her current income and expenses. The balance sheet is used by the court to determine whether the reaffirmation should be approved.

Even though a filer may find it easier to pay one debt obligation after the discharge of others in bankruptcy, reaffirmations are voluntary and are not required by law. If you are considering bankruptcy in Pennsylvania and would like to retain a property through continued payment, contact an experienced bankruptcy attorney to discuss your options.

Article provided by Scott C. Painter
Visit us at http://www.scottpainterlaw.com/