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Should I file a reaffirmation agreement?

If you are looking at filing for Chapter 7 or Chapter 13 bankruptcy, you may have come across the term, “reaffirmation agreement.” This is essentially a document that states you are committed to paying a specific debt, despite your bankruptcy status. However, you should consider several things before deciding to file one.

First, you should understand that this agreement is not required. A reaffirmation agreement can be beneficial in that it acts as a form of communication between you and a lender. This can provide the lender with assurance from you that you are intending to repay the debt, thereby preventing the repossession of property such as a home or car.

A reaffirmation is considered a legal contract, so before you file one, you should carefully assess your financial situation and make sure that you really can meet those payments. If you file a reaffirmation, you assume personal liability for that property. This means if you fail to make those payments, the lender can take action against you, such as starting foreclosure proceedings or repossessing your car. Additionally, once the property is sold, the lender may have the right to go after you in court for the balance of the debt left unpaid.

In some cases, a reaffirmation agreement is not possible. According to Cornell University Law School’s Legal Information Institute, if you file an agreement, you must provide information relating to your financial situation. Based on that information, the court could choose to deny the filing if it determines that undue hardship exists. Lenders may also reject the filing if you are behind on payments for that debt.

To file a reaffirmation agreement, you must submit documentation that shows you have the ability to continue to pay the debt, even though it may be eligible for discharge under the bankruptcy filing. You also must file the agreement after a date has been set for the creditors to meet, and within 60 days. It should be noted that this information is not intended to be taken as legal advice.

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