Can I Save My Property Through Reaffirmation if I File Chapter 7?
Despite the fact that bankruptcy may be a prudent or even the sole debt relief option, some consumers may feel reluctant to opt for bankruptcy. The emotional stress of debt can cause a debtor to doubt that there is hope of ever emerging out of the debt pool. Some may worry that bankruptcy will cause more harm than good, due to negative credit ratings that accompany bankruptcy. Others agonize over the thought of losing their most treasured property and assets in the bankruptcy process. Such misguided anxieties actually impede the bankruptcy process.
For those who qualify, Chapter 7 makes it possible to eliminate most consumer debts and creates an avenue to improve your credit scores almost immediately after filing. While it is possible that the bankruptcy trustee — who oversees the administration of your bankruptcy case — may sell some of your property to pay your creditors, you may use the reaffirmation process to retain some of your property. Unfortunately, unscrupulous creditors can prey on your fears and convince you to reaffirm certain debts, unnecessarily.
What is reaffirmation?
Reaffirmation is an agreement you make with your creditor to voluntarily continue making payments on a debt that would ordinarily be discharged in your bankruptcy. Usually, some type of property, such as an automobile, secures the debt that qualifies for reaffirmation. Furthermore, you cannot claim one of the exemptions that would allow you to keep the property. There are instances where unsecured creditors try to convince you to keep an open line of credit or credit card through reaffirmation. You should avoid reaffirming unsecured debt as it simply defeats the purpose of filing bankruptcy.
Getting the most from reaffirming debt
In order to take full advantage of reaffirming debt in bankruptcy, it is best to negotiate a payment plan that reduces your obligation on interest or principal or both. You should cautiously use redemption as an option because the debt is no longer protected under bankruptcy. Therefore, if you miss payments, you can face repossession, wage garnishment and other collection actions.
The court must approve the redemption agreement, and you and your attorney must certify that the redemption will not cause undue financial hardship on you or your family.
If you've decided to file for bankruptcy and want to keep your property consult with Orange County bankruptcy attorneys. You can depend on a team of attorneys at Fishback Law Corp to help you navigate through the bankruptcy process.