What Is a Reaffirmation Agreement?
When you file for bankruptcy, many of your unsecured debts can be discharged. However, in certain situations, you may want to repay a particular debt such as a vehicle loan so that you can keep the item after bankruptcy. You would do this through a reaffirmation agreement.
Essentially, a reaffirmation agreement is a contract you enter with the creditor where the debt is not discharged and you agree to repay the debt after the bankruptcy.
Can I Use a Reaffirmation Agreement to Keep My Car?
A reaffirmation agreement is one way that you can keep certain assets that you need post-bankruptcy but that would otherwise be lost through bankruptcy proceedings. Take your car for example. Although California’s exemptions might allow you to keep several thousands of dollars in equity that you have built up, that might not be enough to allow you to keep your vehicle.
So, instead of losing your vehicle and simply keeping the equity in it, you can choose to enter into a reaffirmation agreement. Here, you simply agree to keep that debt post-bankruptcy and pay it off like you would any other loan. This is oftentimes a viable option because you’ve freed yourself of other debt, which will probably make it easier to repay your car loan.
Should I Enter into a Reaffirmation Agreement?
Whether or not you should enter into a reaffirmation agreement depends on your particular situation. Such agreements are not necessary and you should only do so if it is in your best interests.
Some things to consider before entering into a reaffirmation agreement:
- Do you really need the item? You should only agree to be responsible for a debt if you feel you need it, such as a vehicle to get to work. Otherwise, you may be adding an unnecessary financial burden to your situation.
- Can you afford it? If you truly cannot afford to keep up with the payments, you could be in a worse position than before your bankruptcy. And since you already completed a recent bankruptcy, you will need to wait several years before filing again.
Carefully weigh your options to ensure that you do not fall back into debt with a reaffirmation agreement.
Questions About Bankruptcy? Call Us.
There are certain steps that you can take to better ensure that your post-bankruptcy life is started with the stability you need and deserve. If you’d like to learn more about how to navigate this process in a way that suits your needs, then it might be time to talk to a bankruptcy attorney.
Contact our team today to schedule your free consultation.