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Reaffirming Debts in Chapter 7 Bankruptcy

Serving Families Throughout Mobile

The FAQ: “Do I need to reaffirm this vehicle loan in my Chapter 7 bankruptcy Case? The car is 10 years old!”

ANSWER: The answer is no, with some information. A reaffirmation agreement is an agreement that is sometimes filed jointly by the Debtor and ( usually) a secured creditor such as an auto lender or mortgage lender. The only real benefit to the Debtor is that the loan will continue to be reported to the credit bureaus post-bankruptcy because the agreement re-establishes the Debtor's personal liability post-bankruptcy discharge. The Debtor does not (ever) have to file a reaffirmation agreement. In some instances, an auto lender will repossess the Debtor's vehicle if the loan is not reaffirmed during the bankruptcy case, before the Court issues the Discharge Order, even if the Debtor is current with payments before, during and after the bankruptcy case. A mortgage lender will not foreclose if you choose not to reaffirm the loan and remain current with the payments, but they can foreclose if you default. A bankruptcy discharge applies to the Debtor's personal liability in a consumer bankruptcy case ( ch 7, ch 13 and ch 11 individual bankruptcy cases), but it does not affect the lender's lien on the collateral. This is an issue you should discuss with your lawyer. Whether to reaffirm a debt or not is a personal decision, and the reasons to reaffirm and to decline reaffirmation vary from case to case. This highlights the importance of hiring a bankruptcy lawyer who will take the time to meet and discuss your case personally with you, confidentially. Call me. I'll BE there for you. (251) 241-5234.

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