Chapter 7 Bankruptcy: Reaffirming a Secured Loan

Chapter 7 Bankruptcy: Reaffirming a Secured Loan "The purpose of Chapter 7 bankruptcy is debt discharge, which permanently shields the filer from creditor collection efforts. However, debtors may not always wish to discharge specific debts. I'm not talking about a credit card with frequent flyer miles or a bill from a preferred physician. In Chapter 7 bankruptcy, all unsecured debt, with the exception of student loans, is discharged, even if the debtor wishes to exclude the creditor from the process. Through a document known as a reaffirmation agreement, however, secured loans such as mortgages and auto loans can be exempt from the discharge order's effects.Reaffirmation signifies that the debtor waives their right to debt cancellation. In exchange for reaffirming the loan, the debtor is permitted to retain the collateral. Reaffirmation agreements require both the debtor and creditor to sign. Reaffirmation agreements are entirely voluntary, and a debtor cannot compel a creditor to sign one. If a creditor refuses to sign, they will typically refrain from repossessing a vehicle or foreclosing on a residence if the debtor continues to make payments according to the original contract. There are additional requirements, such as paying property taxes to prevent the lender's lien from becoming subordinate and maintaining adequate property insurance.Reaffirmation agreements require court approval. Each agreement is reviewed by the bankruptcy court before it becomes legally enforceable. The court evaluates the agreement and determines whether or not the debtor can afford the payments based on the income and budget information included with the schedules. In most instances, the court will not permit the debtor to reaffirm a debt that they cannot afford, as evidenced by the schedules. If the court rejects the reaffirmation agreement, the debt is discharged, but the debtor can typically retain the property by continuing to make payments according to the original contract.
" - https://www.affordablecebu.com/