One of the things that I talk about at almost every consultation is the issue of reaffirming debts in Chapter 7 bankruptcy. Reaffirmation typically comes up only in relation to secured debts. Examples of secured debts are car loans and mortgages.
There are two elements to a secured debt. The first is the promissory note. The promissory is your promise to repay the debt. The second element is the security interest. In the case of a home, this is the deed; where a car is involved, this is the title. The title or deed is what allows the lender to foreclose or repossess if you fail to pay your loan.
When you file Chapter 7 bankruptcy, the promissory note – your promise to pay – is discharged (eliminated). The reason that most people are able to keep their car or home when they file bankruptcy is the lender still has the security interest. As long as you keep paying, they won’t foreclose or repossess. Of course if you stop paying, they’ll come and get your car or start foreclosure proceedings. Without the promissory note, though, they can’t come after you for any money.
But since the promissory note will be discharged along with your other dischargeable debts (like medical bills, credit cards, and payday loans), the lender will stop reporting your payments to the credit bureaus.
Sometimes a lender will try to persuade you to sign a reaffirmation agreement to get your payments reported. The reaffirmation agreement will revive the promissory note. There are other consequences beyond getting your payments reported, though. If you fail to make payments, they can still repossess your car or foreclose on your home. But in addition, they can sue you for any money you owe.
Signing a reaffirmation agreement is a serious decision. One that should not be considered without talking to your lawyer first.
Talk To An Experienced Denver, Colorado Chapter 7 And Chapter 13 Bankruptcy Attorney
If you have questions about how bankruptcy will affect certain debts or your credit report, come in for a free, no-obligation consultation with an experienced Colorado bankruptcy lawyer. You can make an appointment by calling 303.331.3403 or by using our online scheduling system.
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