When you file bankruptcy you have a lot of questions. You might wonder if you will have to move out of your house, or turn your car over to the lender. Most people file bankruptcy to stop collection calls and wage garnishments, or to save their family home from foreclosure. Other times an overwhelming amount of credit card debt may have accumulated, making it difficult to just keep your head above water. The ability to keep some of your things is important, especially when those things are your car or your house. You can accomplish this goal through bankruptcy while eliminating other debt that is making it hard to maintain payments on the necessities..
The way to hold on to your things when you file bankruptcy is by executing a reaffirmation agreement. A reaffirmation agreement is like a new contract for the debt. If you enter into a reaffirmation agreement, the debt will not be discharged (eliminated) in your bankruptcy and you will be responsible for repayment even after your case ends. When you remain liable on a debt it is important to understand what might happen in the future, such as:
- Possible lawsuits: discharged debts are debts that are legally no longer due. When you reaffirm a debt, it is not discharged. This means if you fail to make payments, even after the bankruptcy case is over, the creditor can sue you for the amount due.
- Possible collection: creditors are not allowed to call you to collect a debt that has been discharged in bankruptcy, but with a reaffirmed debt that is not considered discharged, the calls are allowed. This means if you fail to make payments on a reaffirmed debt, you might receive a collection call or letter seeking repayment.
This sounds scary, and so the decision to enter a reaffirmation agreement should only be made with the assistance of a skilled bankruptcy attorney. Creditors are not the only ones with options regarding reaffirmation agreements. You also receive certain benefits that do not exist for debts that are not reaffirmed. For instance, you remain in good standing with the creditor, which might make it easier to obtain a new loan from them at a later date. A reaffirmation agreement also gives you the ability to talk to your creditors about the debt, which comes in handy if you need to ask for an extension or modification of payment terms. Absent a reaffirmation agreement, a creditor is not allowed to talk to you about the debt or give you these options.
If you have questions about what it means to reaffirm a debt, call our office for answers. Let an experienced attorney help you understand the process and prepare you for what to expect. Call a Bloomington, Minnesota bankruptcy attorney today.