While in the process of a Chapter 7 Bankruptcy, you are likely to be asked to sign a reaffirmation agreement for a specific debt. A reaffirmation agreement is a contract signed by you and a creditor to essentially keep a debt active, despite your bankruptcy filing. The first question you may be asking yourself is: Why would I ever want to keep debt when I’m getting rid of everything in my Chapter 7 Bankruptcy case? If you have secured debt, which is classified as real property, a vehicle, and in some cases, electronics and furniture (if financed through a retail store), then a reaffirmation agreement is very likely to be a factor during your case.
The way these specific debts work during bankruptcy is that you can keep the collateral, such as your house or car, and continue to pay for them without your bankruptcy filing affecting any of the terms agreed on. During the reaffirmation process, a creditor will send a copy of the agreement to your Miami Bankruptcy Attorney. The first pages of the agreement will contain the details of your new payment plan. In most cases, the creditor will keep the terms identical to those set before your bankruptcy filing. If you have a debt with a retailer such as an electronics store or a furniture store, there may be some changes to allow you to pay the balance owed with little to no interest over a set period of time.
During the filing process, your income and expenses are calculated and reflected in your petition for your creditors to review. This same information is then added to the reaffirmation agreement you will be signing to ensure that you have enough money left over to cover this added expense. Although you may ideally want to keep all of your assets and are willing to sign any and all agreements, it is important to consider the long-term effects these agreements have. After the 60-day grace period or when you receive your discharge (whichever comes first), you are contractually bound to the terms associated with your reaffirmation agreement. It is important to review all of your finances carefully and make sure that you can afford the amounts you are reaffirming prior to sending your contract back to the creditor. If you decide to not sign a reaffirmation agreement because you cannot afford the expense, you can return the collateral to the creditor through your bankruptcy case and in almost all cases, be rid of any liability for the debt once your case is discharged.
You are not forced to give up all of your assets just because you have filed for bankruptcy if you can afford to keep them and continue paying for them. A reaffirmation agreement is a good way to ensure that you can keep these assets in your possession long after your case is finalized. For more information on filing for Chapter 7 Bankruptcy and a free consultation to review your case, please contact Alberto H. Hernandez, Esq. at 305-820-0334 for a one on one meeting in one of our Miami -Dade or Broward County offices.