Posted on: 28 January 2022
When you sign the forms to file a Chapter 7 case, your attorney sends your case to the local bankruptcy court. Once there, the court appoints a trustee to manage it. The trustee plays a critical role in the case, but you might have a few things to do, too. One thing your attorney might recommend is reaffirming your debts. What does this mean, and should you do it? While not everyone needs to go through this process in a Chapter 7 case, some people do. Here are several things to know about reaffirming debts in a Chapter 7 bankruptcy case.
The Only Debts You Might Need to Reaffirm
As you begin learning about reaffirmation of debt, you will need to know one main thing. You only need to consider reaffirming debts that represent secured loans. A secured loan is one that has an asset pledged to it. For example, a home mortgage is a secured loan, as the house is the asset pledged to the loan. A car loan is another example of a secured loan. If you owe money on your house and want to keep it, you might need to reaffirm the debt. The same is true if you have a car loan on a vehicle that you want to keep.
The Reason You Reaffirm a Debt
Reaffirming a debt serves a vital role. It creates an agreement with the lender that you owe money for the debt. When you reaffirm a debt in a Chapter 7 case, you tell the lender that you want to keep the asset. You also tell the lender that you will continue making the original payments on the debt. If the lender accepts the agreement, the loan terms remain the same. You risk losing the asset only if you fail to make the payments that you agreed to make.
The Considerations Before Reaffirming a Debt
Before you reaffirm a debt, you should speak with your bankruptcy lawyer to make sure this is the right move. In most cases, it is the right move when you want to keep a car or house in a Chapter 7 case.
As you can see, reaffirming a debt in a Chapter 7 bankruptcy case helps you keep the asset with the debt. If you still have questions about this process or other parts of a Chapter 7 bankruptcy case, contact a local bankruptcy attorney today.Share