Answers to Your REAFFIRMATION Questions:

REAFFIRMATIONS IN CHAPTER 7


If you finance a home, vehicle, or personal property such as jewelry, furniture, or tools, you must decide whether or not to reaffirm the debt secured in your property.


Colorado Law Group will inquire about your desire to reaffirm your secured debts and indicate your answers on the debtor's statement of intent which is part of your bankruptcy petition and schedules.


  • Reaffirmation agreements are not mandatory, meaning that bankruptcy law does not require that you sign a reaffirmation agreement in order to retain possession of your financed property.
  • Reaffirmation agreements are extended by the creditor i.e. it is not possible to reaffirm a debt without the consent of the creditor. Usually, the creditor would provide the agreement, sign it, and then file it with the court.
  • Certain requirements must be met in order to reaffirm a debt (see below).
  • Reaffirmation agreements may be rescinded if you change your intent. However, you must be aware that certain deadlines apply.

What DOES A REAFFIRMATION DO?


  • It excludes a certain secured debts from bankruptcy discharge.
  • It allows the creditor to resume reporting to the credit agencies without violating the automatic stay.
  • It allows a creditor to reinstate certain services such as online bill pay, auto pay, monthly invoicing, etc.


WHAT ARE THE REQUIREMENTS TO REAFFIRM A DEBT?


  • The loan must be in current status. It is not possible to reaffirm a delinquent debt, unless the amount due is brought to current i.e. less than 30 days past-due.
  • The reaffirmation agreement must be signed prior to the entry of discharge. If not, the debt becomes discharged in the bankruptcy and can no longer be reaffirmed.
    • If a debt is not reaffirmed within 45 days from the creditors' meeting, the automatic stay will expire and the financed personal property (vehicle, furniture, etc.) may be repossessed.
  • The lender must agree to the reaffirmation. The reaffirmation agreement must be signed by the lender in order to be enforceable. In some situations, lenders refuse to extend reaffirmation agreements to individuals with long history of delinquency and non-payment.
  • The reaffirmation agreement must not pose an undue hardship on the bankruptcy filer. If there is insufficient income to pay for the monthly payment on the reaffirmed debt, the court will not approve the reaffirmation agreement.


What if you reaffirm a debt you can't afford?


It is not unusual for bankruptcy filers to reaffirm a debt and then become unable to make the monthly payments on that debt. Should that happen, you must consult with your attorney immediately to check whether the reaffirmation agreement could be rescinded. The deadline to rescind is 60 days from the date of the agreement or its filing with the court, whichever is later.


If the deadline to rescind has passed, you would remain liable for the debt as if you never filed bankruptcy. In most cases the financed property will be repossessed and sold in auction to pay the loan. Should the auction proceeds fail to satisfy the loan, the creditor will attempt to collect from you the deficiency on the loan i.e. the amount that is outstanding after the sale of the property.


WHAT HAPPENS IF I DON'T REAFFIRM A DEBT?


  • You may be able to keep the financed property (home, vehicle, furniture, etc.) for as long as you continue to make your monthly payments on time.
  • Your monthly payments will not be reported to the credit agencies (any missed payments will not be reported either).
  • You won't have access to online bill pay, auto pay, monthly invoices, and any other customer services that you enjoyed before the bankruptcy.



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