The Pros and Cons of Reaffirming a Debt in Bankruptcy
When you reaffirm a debt, you sign a contract to
continue making payments to the lender. Think of this contract as
taking your vehicle loan or mortgage totally out of the bankruptcy.
This means that if you ever stopped making payments on the debt, the
lender would be able to repossess the vehicle and collect the balance
owed from you.
There are several pros to signing a reaffirmation
agreement. First, since the debt does not show as discharged on your
credit, you will continue to receive the positive impact on your credit
from timely monthly payments. Also, since we are doing a great benefit
to the lender by making it so that you cannot walk away from the
vehicle in the future, lenders are often willing to negotiate better
terms on your existing loan. We can often get interest rate deductions
which help make your monthly payments more affordable, and can
sometimes get principal balance reductions too. You also have the
security of knowing you are complying will all laws, so the lender
cannot repossess the vehicle unless you stop making your payments.
The main down-side of the reaffirmation agreement is
that you are stuck in the loan in the future if you later can't afford
All reaffirmation agreements require our office to
prepare an agreement reaffirming the loan which must be signed by your
attorney, you, the lender, and a bankruptcy Judge. You must also attend
a special court appearance with the attorney to get the agreement
approved by the court, and must be able to prove to the Judge that you
have the ability to pay this loan each month. These extra steps are why
our office charges additional fees for this work.
For more information about reaffirmation agreements of
the bankruptcy process, please call Kristy Hernandez, California
Bankruptcy Attorney for a free consultation at 510-456-7400 or visit
her at http://www.khernandezlegal.com
Kristy Hernandez Esq.
Law Office of Kristy Hernandez,
Central Court, Suite 201,
Newark, California 94538
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Page created/updated 07/20/2010