Although you file a Chapter 7 bankruptcy to discharge or wipe-out your debts and get a fresh start, you have the option to sign a written agreement to “reaffirm” a debt. If you choose to sign a Reaffirmation Agreement with one of your creditors, you will still owe that debt after your bankruptcy is finished.
And in the future should you get behind in payments on a reaffirmed debt, that creditor has the right to come after you in order to collect the debt. Which means that the creditor could make collection calls, send collection letters, sue you, and maybe garnish your paycheck and repossess or foreclose on your property.
Rarely is it in a person’s best interest to reaffirm a debt.
If you are struggling with debt problems and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.
{ 8 comments… read them below or add one }
We had a big flood in December 2007. I bought a $18,000 Kubota tractor in the spring of 2008 to help clean up my mom’s farm. I was going to make the payments by using it to till gardens and mow tall grass. Then the price of gas went through the roof. Then came the real estate crisis. Then came the banking crisis. Now I’m four months behind in my payments and they want to repossess it. I am self-employed and things have gotten so bad I’m on food stamps.
I desperately want to hang on to the tractor because there’s still a lot of work to do around mom’s place and I really think I could make some money on it if the economy ever picks up.
In addition to the tractor, I’ve got about $27,000 in credit card debt.
Should I file Chapter 7 with a reaffirmation agreement?
Or should I go Chapter 13 and not worry so much about the unsecured debts?
Or am I so far gone that I file Chapter 7 and give up the tractor?
Thanks!
Chuck,
In order to properly advise you, I will need more information. Therefore, I have emailed you directly to discuss your situation.
Dan Nunley
I was discharged on my chapter 7 already, with two reaffirmation car loans, one of them was repossesed already, and they are collecting the debt because the reaffirmation, what can I do legally to get out of this debt now? file another bankruptcy?
thanks,
Luis Jerez
Luis,
You are an excellent example of why it is almost always inadvisable to sign a reaffirmation agreement on a motor vehicle loan. As I am licensed to practice law only in Oklahoma and it appears that you live in California, I cannot give you legal advice. Your available options will depend on the specifics of your situation. I suggest that you seek legal advice from a knowledgeable attorney near you. I wish you well.
Dan Nunley
I have a 2009 Ford Focus that is financed for $22,504.26 but is only worth $15,694.00. I’ve filed bankruptcy and received a reaffirmation agreement from the finance company. I drive the vehicle and make the payments but I believe that my mom is the primary borrower. I can no longer afford the payments. Can I return the car without the financing company coming after my mom for the amount owed on the car?
Matt,
Thanks for your question. While your personal bankruptcy will wipe out the debt you owe on the car, your mom will still be liable to the finance company for the entire balance.
Dan Nunley
I have filed chapter 7 bankruptcy, had my creditors meeting and am now waiting for the discharge. I have a debt on two motorcycles that I have reaffirmed. I am making the payments and all is fine. However, I may have the opportunity to sell one of the bikes which will pay off the loan. Can I do that before the official discharge? or do I have to wait?
Terry,
If the Chapter 7 trustee has abandoned the bankruptcy estate’s interest in the motorcycle, then you can sell the motorcycle without any complication. The trustee would do this by filing a Report of No Distribution shortly after your Meeting of Creditors.
Dan Nunley