When going through the bankruptcy process, it is very common to receive something known as a “reaffirmation agreement” from a lender. Generally, these agreements will be sent out by lenders with whom you have a secured loan, such as a mortgage, a car loan, or a home equity line of credit. These agreements are essentially written requests for a debt to be excluded from the bankruptcy discharge. Should you choose to sign a reaffirmation agreement, it would filed with the court after its completion, and a judge would then determine whether the debt in question should be reaffirmed and excluded from discharge.
In light of this, you might find yourself wondering whether it is in your best interests to reaffirm a secured loan for something that you wish to keep, or indeed whether it is necessary to reaffirm such a loan to avoid that thing from being repossessed. In most instances, the answer is that reaffirmation is not necessary. Many lenders, including most mortgage lenders, will allow you to continue payments on the loan after discharge without reaffirming it. While there are some lenders that do require reaffirmation to retain a vehicle after the bankruptcy discharge, more often than not this will not be the case.
You might also wonder what the benefit in opting not to reaffirm a debt might be if you wish to continue making payments on it regardless. First and foremost, the biggest benefit is that the debt will no longer be collectable against you after the bankruptcy has concluded. This means that once the discharge has gone through, the lender will no longer be able to bill you or call you.
Beyond this, it also means that the lender will never be able to pursue you for a deficiency once the debt is discharged. Using the hypothetical example of a vehicle loan, this means that the lender would never be able to sue you for the original amount of the loan once the discharge has gone through. This means that if at any point in the future you decide that you wish to surrender the car back to the lender (if, for example the car breaks down or it is totaled in an accident) you can simply call the lender, ask them to come pick up the vehicle, and then walk away from the entire situation completely without any obligation to make any of the remaining car payments.
CALL NOW FOR A FREE STRATEGY SESSION FROM AN MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
Determining the best path forward with regard to the treatment of a loan in the bankruptcy process can feel like a little bit of challenging prospect sometimes. Luckily, our firm is highly experienced in interpreting and advising on the reaffirmation process, and our attorneys would love to speak with you about it to advise on how reaffirmation may impact your individual circumstances. So, when the time is right, or when you are ready, please don’t hesitate to reach out to Minnesota’s most kind and helpful bankruptcy law firm by going now to www.lifebacklaw.com.
