Reaffirmation is one of those strange part of the old bankruptcy code and the new bankruptcy code. (BAPCA) Over the next few parts I am going to talk about why reaffirmation is bit weird and a little different depending on what state and what district you are in.
Reaffirmation is the resigning of a personal obligation on a secured debt following the filing of a Chapter 7 . In general if a debtor wanted to keep the item (collateral such as car, houses and furniture) that secured the debt the debtor needed to meet 2 conditions.
- One the debtor would have to be current or be able to get current .
- Two the debtor would have to resign or re-obligate himself to the debt. This would make the debtor responsible on the debt.
Even though the debtor filed bankruptcy and received a discharge if the debtor signed a reaffirmation the debtor would still personally owe the money on the debt. If you did not resign the creditor was entitled to pick up the goods through the state court process.
The debtor does have the option of surrendering the items to the creditor and the underlying debt would be discharged in the bankruptcy.
Bankruptcy lawyers for debtors have created other choices. In nany jurisdictions the debtors is offered the option to pay and keep the item (collateral) without resigning on the debt. When the bankruptcy is over the debtor continues to pay and keeps the item. If the debtor fails to pay then the creditor can reposes the item through state law. The advantage to the debtor is they are no longer responsible on the underlying debt. Their obligation was discharged by the bankruptcy.
It is very important to review this matter with a bankruptcy lawyer in your area as how this is plays varies from state to state.
Part 2 Should I reaffirm on my Mortgage
Part 3 Should I reaffirm on my Car
part 4 Reaffirmation on household good loans and other thoughts
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