Should I Enter a Reaffirmation Agreement?

A reaffirmation agreement is a legally binding contract between a debtor and a creditor entered into during consumer bankruptcy proceedings. Here, a debtor holds themselves accountable for paying back the outstanding debt owed to their creditor, even after a bankruptcy discharge takes place. You may wonder why you would want to continue worrying about this debt when you can simply relinquish your financial responsibility to it at the end of your case. Well, for this, please follow along to find out whether or not you should enter a reaffirmation agreement and how a proficient Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can guide you in making the right decision.

Under what circumstances should I enter a reaffirmation agreement?

Generally speaking, you should not volunteer for a reaffirmation agreement if doing so would cause great financial hardship. A good indicator that you are capable of staying financially afloat is if you are currently up-to-date on the debt payments in question. Otherwise, you may seek your lawyer’s advice or let the court approve your entering this agreement.

If you choose to move forward, the key benefit of this arrangement is that you may maintain possession of your property that serves as the collateral for the loan in question. Namely, you may keep your house and your vehicle, which your appointed bankruptcy trustee would have otherwise taken, sold, and distributed the liquidated funds to the respective creditors.

Secondly, with this agreement, you may keep a positive relationship with your creditors. In a best-case scenario, after you exhibit your trustworthiness to pay off your debt, they may be more willing to offer you future loans with fair terms. Also, you may help your co-signers with these loans, who you believe should not suffer the aftermath of your personal bankruptcy filing.

Last but not least, if you opt to reaffirm certain debts, the credit reporting agencies may make note of this. In turn, you may have an easier time rebuilding your credit score after your bankruptcy case, which is one of the more common struggles debtors deal with. Again, this may improve your opportunities for future borrowing.

Is it possible to cancel a reaffirmation agreement once I sign one?

To reiterate, a reaffirmation agreement is a legal contract that you voluntarily enter. And so, even though it is legally binding, you may not be punished with a prison sentence or any other harsh consequences for failing to uphold your end. Typically, a breach in this contract may simply result in a creditor repossessing your property used as collateral for the loan.

You may have every intention to keep up with the terms of your reaffirmation agreement, but other financial factors in your life may make this difficult. Rest assured, you may be able to cancel or rescind this contract even if the court has already approved it. But typically, this must be done within 60 days of submitting it or on the date of your bankruptcy discharge.

If you desire more clarity before you head into your bankruptcy proceedings, please do not wait any longer to reach out to a talented Louisville, Kentucky consumer bankruptcy lawyer. Retain the services of Schwartz Bankruptcy Law Center today.