Reaffirmation Agreements

Chapter 7 bankruptcy is generally thought of as a liquidation bankruptcy, meaning that a person must turn over their property to a trustee which is then sold to help pay debts owed to creditors. But what if there is a piece of property, such as a car or truck, that is important to you for you to retain? Where eligible, a reaffirmation agreement is possible where the debtor and the creditor agree to continue operating under the existing arrangement, as if a bankruptcy was not occurring. For example, a debtor filing Chapter 7 bankruptcy who wants to retain their vehicle can enter in a reaffirmation agreement, assuming they qualify, with the creditor, in which the debtor continues to owe the creditor and make regular payments to the creditor just as they did under the original debt, and in exchange the creditor agrees to not repossess the secured property (in this case, the car) from the person. Often times reaffirmation agreements are an opportunity for the debtor to negotiate new terms, to reduce payments, or to reduce an interest rate. There are risks to reaffirmation agreements, however, and it is important that you understand all of the benefits and all of the risks before you seek to execute such a deal. Please contact Attorney Timothy Heinle with our office for a free consultation for more information.