Reaffirmation Agreements in Bankruptcy

One of the most common questions I get asked by potential clients is “Can I file bankruptcy and keep my car?” The answer to that question is yes. A potential client can file for bankruptcy protection and keep their car by executing a reaffirmation agreement with the secured creditor.

Navigating the Reaffirmation Agreement

Reaffirmation Agreements are fairly complex and I recommend debtors find legal counsel when entering such agreements. It is important to know that Rule 4008 of the Federal Rules of Bankruptcy Procedure requires that Reaffirmation Agreements be filed with the court no later than 60 days after the first date set for the meeting of creditors. The official form for Reaffirmation Agreements also requires the debtor to state his or her total income and expenses as listed in schedules I and J of the bankruptcy filing. If the debtor’s total income and expenses differ from that in schedules I and J a statement explaining the difference is required.

The Effects of Reaffirming

Executing a Reaffirmation Agreement has serious legal ramifications which the debtor must understand prior to entering such agreements. A debtor essentially renters a contractual obligation with the secured creditor that the bankruptcy filing stayed and provided the opportunity to terminate. The debtor is allowed to keep the collateral and agrees to continue paying on the debt under the original terms. The Bankruptcy Code only allows a debtor to file a chapter 7 bankruptcy once every eight years. Thus, if a debtor reaffirms on a car and suddenly falls behind in the payments for any reason within eight years, the creditor can legally pursue the debtor for payment. A debtor is this unfortunate position cannot file for chapter 7 protections and may find themselves facing a garnishment or lien. A debtor may still rescind a reaffirmation agreement for sixty days after it’s filed or up until discharge whichever is longer. It is critically important that a debtor fully understand the requirements and ramifications of entering a reaffirmation agreement and should seek legal counsel when considering such agreements.

Bankruptcy or Other Debt Issues?

The Kepple Law Group is highly knowledgeable in bankruptcy matters and can advise clients in all aspects of bankruptcy proceedings.

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