Should You Reaffirm a Debt that’s in Chapter 7?
September 8, 2023 By: Carrie Weir
What Is Reaffirmation? When Is It a Good Idea? How Do You Reaffirm a Debt?
You’ve lost your job or suffered an injury/illness that prevents you from working and meeting your financial obligations. You’ve submitted to the means test and qualify to discharge debts under Chapter 7. Are there good reasons not to discharge some of those debts, but to reaffirm your obligations with creditors? If so, how do you do that?
What Is Reaffirmation of a Debt?
The reaffirmation of a debt is a new agreement to honor the obligations you had to a creditor, even though the debt qualifies for discharge in bankruptcy. Reaffirmation agreements are never compulsory under the American bankruptcy laws. There may, however, be situations where reaffirming a debt provides benefit to you.
When Would You Want to Reaffirm a Debt that Could Be Discharged in Chapter 7?
There are a number of situations where it could be to your advantage to reaffirm a dischargeable debt:
- Your creditor makes it worthwhile to do so, by offering you better terms. If you’re behind on your payments, though, such an option is unlikely.
- You want your creditor to continue to report on-time payments to a credit reporting agency—This can be instrumental in helping you reestablish your credit after bankruptcy. If you discharge the debt, your creditor won’t make those regular reports to the agency.
- You want to protect the rights of a co-signer—You may have a friend or family member who was a co-signer on the debt. Reaffirming the debt may prevent them from suffering adverse financial consequences.
- Your property is subject to repossession or foreclosure—If you want to keep the property, you may need to reaffirm the debt.
What Is the Process for Reaffirming a Debt?
You must submit a proposed reaffirmation agreement to the bankruptcy court for its approval. The reaffirmation agreement must be signed within 60 days of your original meeting with creditors, unless the court grants you a longer period of time.
Contact an Experienced Rockwall, TX Bankruptcy Attorney
Learn more about the reasons for reaffirming a debt in bankruptcy. At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.