At Walker & Walker, we know that bankruptcy is often the best path for people who feel overwhelmed by debt and are seeking a fresh start. But what happens when you want to keep certain assets, like your car or house, that are tied to a loan? That’s where a reaffirmation agreement can come into play.
If you’re considering bankruptcy and want to retain secured assets, understanding how reaffirmation agreements work is essential. Let’s break it down:
What Is a Reaffirmation Agreement?
A reaffirmation agreement is a legal contract between a debtor and a lender, made during the bankruptcy process, where the debtor agrees to remain responsible for paying a specific debt, even after bankruptcy discharges other debts. Essentially, you “reaffirm” your obligation to continue paying the loan.
This agreement is commonly used when someone wants to keep their car, home, or other secured property that they might otherwise lose in bankruptcy. By signing a reaffirmation agreement, you keep the property and agree to continue making payments, just like before filing for bankruptcy.
Why Would You Choose to Reaffirm Debt?
While bankruptcy gives you the chance to eliminate many of your debts, reaffirming a debt allows you to keep certain assets you want to retain. For example:
- Your car: If you need your vehicle to get to work or take care of your family, reaffirming the loan can help you keep it.
- Your home: If you’re current on your mortgage and wish to stay in your house, reaffirming the mortgage may be a practical option.
Reaffirmation provides stability when you’re willing and able to keep up with payments on a secured loan, and the asset itself is essential to your day-to-day life.
Benefits of Reaffirmation Agreements
Before deciding whether to sign a reaffirmation agreement, it’s important to consider the advantages:
Keep Your Essential Assets
One of the biggest benefits of a reaffirmation agreement is the ability to retain key assets, such as your car or home, that are tied to a secured loan. If these assets are crucial to your daily life—whether for commuting to work or providing a place for your family to live—a reaffirmation allows you to keep them and continue making payments.
Rebuild Your Credit
Continuing to make on-time payments on a reaffirmed loan can help rebuild your credit more quickly after bankruptcy. While your other debts are discharged, reaffirming a loan allows you to demonstrate responsible financial behavior, which can improve your credit score over time.
Financial Control and Stability
Reaffirmation agreements give you control over which secured debts you want to keep, while still allowing you to discharge unsecured debts. This financial flexibility can help you maintain stability, particularly when the asset is worth more to you than the debt associated with it.
Avoid Repossession or Foreclosure
By reaffirming a loan, you avoid the risk of losing valuable property to repossession or foreclosure. This can be especially important for assets that are difficult to replace or that provide long-term value, such as a family home or reliable vehicle.
Do You Need a Reaffirmation Agreement?
Reaffirmation isn’t the right choice for everyone. It depends on your financial situation and whether keeping the asset is worth the ongoing payments. At Walker & Walker, we’re here to help you navigate these decisions. We take a personalized approach to every case to ensure you understand your options and make informed choices.
If you’re current on your payments and the asset is vital to your life, a reaffirmation agreement could provide the best of both worlds: you get to keep the asset while still eliminating other debts through bankruptcy. However, it’s important to ensure the terms of the reaffirmation agreement are fair and reasonable before signing.
Walker & Walker Is Here to Help
Navigating reaffirmation agreements can be complicated, but you don’t have to do it alone. At Walker & Walker, we’ll assess your specific situation, explain the benefits of reaffirming a debt, and help you make the best decision for your financial future.
If you’re considering bankruptcy and wondering if a reaffirmation agreement is right for you, contact Walker & Walker today. Our experienced team is ready to guide you through the process and help you secure the fresh start you deserve.
