What is Debt Reaffirmation, and When Should You Do It?
If you file for bankruptcy under Chapter 7, one of the most important decisions you may need to make during the bankruptcy process is whether or not to reaffirm certain debts. This decision requires serious thought and is one that may benefit from professional advice. Read on to learn more about reaffirming debt in Chapter 7 bankruptcy, and contact a skilled Maryland bankruptcy attorney for more information.
The basics of debt reaffirmation
Debt reaffirmation occurs when you choose to keep paying a debt you owe, rather than have it discharged along with your other debts in bankruptcy. For the most part, bankruptcy petitioners choose to reaffirm debts rather than have them discharged when they want to keep the collateral that’s securing the debt; for example, debtors frequently choose to reaffirm a car loan when they want to hang onto their personal vehicle.
Am I allowed to reaffirm a debt?
Typically, creditors are glad to allow their customers to reaffirm a debt, as it means the debt won’t be erased in bankruptcy and they won’t need to find a new buyer for any repossessed property. Reaffirmation is an option when you’re current on payments for the debt or could become current within a matter of a couple months. In some cases, the lender may be willing to allow extra time for you to become current on your debt. In other cases, the creditor may be willing to negotiate some other alternate arrangement when you agree to reaffirm a debt, such as shifting the missed payments to the end of the loan period or forgiving the arrears entirely. Your bankruptcy attorney can negotiate solutions such as these on your behalf.
Deciding when reaffirming a debt is a good idea
Debt reaffirmation comes with pros and cons. Debt reaffirmation is one way to boost your credit score after your bankruptcy case is complete. It may also be the only way you can hang onto property you’ll need, such as a car, if you won’t have the cash on hand or available credit to repurchase the property after your bankruptcy case is closed. However, if you’ll have a hard time making payments on the debt you’re considering reaffirming, then don’t reaffirm it. You wouldn’t want to damage your credit after your bankruptcy case is closed by missing payments on property you can’t afford to keep.
If you’re struggling with debt in Maryland and want help getting back on the right financial footing, contact a knowledgeable and seasoned Germantown bankruptcy lawyer at Haeger Law for a no-cost consultation at 888-463-3520.