Bankruptcy Lawyers Michigan: What is the Purpose of a Reaffirmation Agreement in Chapter 7 Bankruptcy?

A reaffirmation agreement is a new contract between a creditor and the debtor(s) in a Chapter 7 Bankruptcy.  Simply put, it is a

promise to pay the debt.  The legal document outlines the terms in which the filing debtor(s) agrees to remain liable or legally responsible for a debt that would otherwise be dischargeable in bankruptcy.

For more information on filing bankruptcy in Michigan, call us today at 866-261-8282for a free consultation.  For over a decade, our bankruptcy law firm has specialized in debt resolution and improved credit We have helped over 12,000 Michigan families find lasting debt relief through:

• Chapter 7 Debt Elimination;
• Chapter 13 Debt Consolidation;
• Non-bankruptcy Debt Settlements.

It is the creditor's responsibility to provide a reaffirmation agreement during the Chapter 7 process and in almost all cases, they do provide one.  Our bankruptcy law firm finds that we receive reaffirmation agreements from a variety of creditors:  mortgage companies, car financing, unsecured debt, etc.  In most cases, a reaffirmation agreement is signed for the purpose of maintaining property that otherwise would be repossessed by the creditor.   Reaffirmations are voluntary and not a requirement of the Chapter 7 bankruptcy process. Our bankruptcy attorneys review reaffirmation agreements with our clients before they agree to the terms and sign the necessary paperwork.  It is a careful consideration, as the new debt resulting from the reaffirmation agreement is a non-dischargeable debt. By signing a reaffirmation agreement you become legally obligated to pay all or a portion of an otherwise dischargeable debt.  

 What Happens After a Reaffirmation Agreement is Signed?

After a reaffirmation agreement is executed and mailed back to the creditor a new debt is essentially created.  Payments are required to be made during the bankruptcy process and accounts usually must be current for a creditor to offer a reaffirmation agreement.  Once the document is recorded with the creditor, they will once again begin:

• Mailing  statements directly to the debtor;
• Reinstate online access;
• Reflect payment status with the credit bureaus, etc.

What Happens if I Don't Sign a Reaff?

If you are not delinquent on payments for a specific debt, and decide not to sign a reaffirmation agreement, many lenders will still accept the option to retain the collateral and pay the debt in regular monthly payments.  However we are finding that in some cases, creditors will automatically require a return of the collateral if the reaffirmation agreement is not signed.  

Protect Your Property by Filing Chapter 13 Bankruptcy

If you are behind on secured property, such as a home or vehicle, it may be more advantageous to file a Chapter 13 bankruptcy to consolidate your debts and protect your property.  While you are required to make some effort to pay your creditors back, a Chapter 13 often allows you time to make minimal repayment efforts. Filing Chapter 13 in Michigan also allows you unique debt restructuring options as well:

• Reduce vehicle loan payment by:  extending terms, lowering interest rate and/or reducing principal debt owed depending on length of ownership.
• Remove a second mortgage(s) or home equity loan depending on your home value and the amount owed on the first mortgage.
• Defer and consolidate all unsecured debts at 0% interest.  Pay back only what you can afford based on your current income and living expenses.

Talk to the Bankruptcy Lawyers Michigan about Your Debt Resolution Questions

Navigating through all of the various debt resolution options can be overwhelming.  Call our debt relief law firm today for a free consultation with a licensed Michigan bankruptcy attorney.  We will provide a free and balanced evaluation of your finances and make qualified recommendations on the best course of action.  Call us today at 866-261-8282 or schedule an appointment online.