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What Is a Reaffirmation Agreement?

October 27, 2021
What Is A Reaffirmation Agreement?

Suppose you’ve been considering filing for Chapter 7 bankruptcy. In that case, it’s wise to understand what a reaffirmation agreement is, as this will be a document you may need to sign with multiple lenders and creditors.

This article will discuss reaffirmation agreements and why it’s a crucial part of the bankruptcy filing process.

What Is a Reaffirmation Agreement?

A reaffirmation agreement is essentially a new contract that you will sign with any lender who has secured collateral with you. For example, if you’ve taken out a loan for a house, car, boat, motorcycle, or even furniture, these items would be considered secured collateral. You have the items in your possession, but you should be actively making payments.

When you sign a reaffirmation agreement with these lenders after filing for bankruptcy, you are essentially signing new contracts that will allow you to continue making the same monthly payments at the same interest rates (or even at lower interest rates in some cases).

Understanding Reaffirmation

Bankruptcy has drawbacks, but they are outweighed by the significant benefit of discharging some or all of your debt. Still, in many cases, you may not want to remove all of your debt. For example, you’ll most likely want to keep the property with a house or car loan. This means reaffirming the loans and continuing with payments will be wise.

If you were to forego reaffirmation in these cases, your lenders would have the option of repossessing your property (your house and car), which is not ideal. Some people may choose not to reaffirm for less essential material goods (say, for boats or motorcycles), and in this case, your lenders will likely repossess your property.

What Is Included in a Reaffirmation Agreement?

A reaffirmation agreement includes details about the loan or collateral in question as well as what you hope your repayment terms will be and what interest rate you’ll be paying.

Keep in mind that you must file your reaffirmation agreement within 60 days of the first time you meet with a lender or creditor. It’s also worth noting that the lender or creditor must accept and approve the document before the court will examine it. If you decide to rescind the document, you have 60 days from the date you file to do so.

Are You Considering Filing for Bankruptcy?

Sometimes, you can’t seem to get ahead. If you’ve been consistently struggling with your finances and are feeling overwhelmed by debt, filing for bankruptcy may be a wise and viable option for you to get back on your feet. At SM Law Group, APC, we specialize in helping clients file for bankruptcy sensibly and responsibly.

Whether you recently lost your job or are struggling after a severe illness or injury, we can help alleviate some of the debt challenges you may be facing. Call today to book your free consultation with one of our highly skilled and knowledgeable attorneys.

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