One of the most appealing benefits of undergoing the bankruptcy process is that, at its conclusion, it may discharge certain debts from your immediate financial obligation. However, if you put a reaffirmation agreement into effect, you may keep some of these debts under your realm of responsibility, which may be worth it in the long run. For more information, please continue reading to learn how a reaffirmation agreement can possibly help you and how an experienced Louisville, Kentucky Chapter 7 bankruptcy lawyer at Schwartz Bankruptcy Law Center can work to ensure its benefits outweigh its drawbacks before you move forward in signing one.

Why would I want to reaffirm my debt during bankruptcy?

Upon initial thought, you may wonder why you would even want to reaffirm your debt if your bankruptcy case is supposed to take care of relieving you from the debt burdens you cannot pay. Well, even though you are experiencing a financial struggle, you may still believe that there are certain debts you can indeed handle paying off. Therefore, you may enter a reaffirmation agreement with a certain lender, where you promise to repay these considerably manageable debts you owe, with either original or modified terms in place, despite your currently going through bankruptcy proceedings.

With this, you may now remain in possession of the assets held as collateral to secure the debts. Particularly, this may mean that you get to continue living in your family home (if you reaffirm your home mortgage) or driving your personal automobile (if you reaffirm your car loan) that your Chapter 7 bankruptcy trustee would have possibly sold to obtain funds to pay off your outstanding lenders.

How can a reaffirmation agreement help or hurt me?

Besides allowing you to keep your secured assets, a reaffirmation agreement can help your financial situation in many other ways. Examples read as follows:

  • Your lender may report your regular, on-time payments to credit reporting agencies and subsequently improve your credit score.
  • Your lender may be willing to negotiate new terms for your outstanding loan, such as a lower interest rate or an extended payment period.
  • Your lender may be willing to preserve a positive working relationship with you and still consider offering you a loan(s) in the future.

Importantly, though, you must understand that this is a voluntary agreement, and you should not sign one if it does not fully align with your best interests. That is, below are potential cons of this legally binding contract:

  • You may limit the full financial relief you can potentially get out of your Chapter 7 bankruptcy case.
  • You may have to work hard to prove to the court that this will not cause you any undue financial hardship.
  • Your lender may attempt to repossess your secured assets if you default on your reaffirmation agreement.
  • Your lender may pursue legal action against you to obtain the remaining balance of your loan if you default.

If you require legal representation, look no further than a skilled Louisville, Kentucky consumer bankruptcy lawyer. The client testimonials on our website speak for themselves, saying that you will not regret hiring the team at Schwartz Bankruptcy Law Center.