What Does It Mean to Reaffirm Your Loan After Bankruptcy? | LifeBack

Posted by Charles Nguyen on October 12, 2021 at 12:53 AM

What Does It Mean to Reaffirm Your Loan After BankruptcyA common question I hear when clients decide to move forward in a bankruptcy is – will I lose my home or will I lose my car? A lot of the time the answer is, no. If there’s a secured loan attached to your property and I’m able to apply the applicable law to protect the equity, then you won’t lose it. Of course, some secured creditors want you to sign a reaffirmation agreement.

What Is a Reaffirmation Agreement in Minnesota?

A reaffirmation agreement is a contract that ties your back to your original loan. In other words, when you file a bankruptcy your liable ends for almost all your debt but this agreement allows you to forgo any protection under the bankruptcy code and confirms that you are going remain personally liable for the debt. Now, you may tell yourself, yes, I’ll sign a reaffirmation agreement, since I’m going to keep my home or car and I’ll continue to make payments. But, there’s a catch.

Your Home Mortgage in Minnesota

When you file a bankruptcy and the debt is discharged, you are no longer liable for that debt. So, if you have a home mortgage, and file a bankruptcy, then you are not liable for that mortgage. However, if you want to keep your home, then you have to keep paying your monthly mortgage; otherwise, your lender would foreclose on the home. Now, let’s say you decide to sign reaffirmation agreement on that home mortgage, then you fall behind on payments, lose your job, etc. Because you signed that agreement, not only would you lose your home in a foreclosure, but you’re now liable for remaining balance and costs.

Your Car Loan in Minnesota

It would be the same for a car loan. Unless you’re required to, you don’t have to sign a reaffirmation agreement to keep the car, just keep making your monthly payments and you’ll be fine. But, let’s say you sign a reaffirmation agreement on your car loan, you get in an accident, or fall behind on payments and lose the car. Because you signed that agreement, the lender can pursue any remaining balance. If you didn’t sign it, then they can’t.

Beware of Signing a Reaffirmation Agreement in Minnesota

In short, don’t sign a reaffirmation agreement; unless, your lender is offering generous terms and even then I would be cautious because the point of a chapter 7 or chapter 13 bankruptcy is a fresh start and reattaching any liable to a loan wouldn’t be one.


So, if you’re thinking of filing for bankruptcy, and or if you have questions or are ready to get your life back, reach out to Minnesota’s nicest bankruptcy law firm by going to www.lifebacklaw.com. You won’t regret it!


Topics: reaffirmation agreement

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