When you file Chapter 7 bankruptcy, you will file a schedule with the court that lists all of your secured debts. For each secured creditor, you will not only list the amount of the debt, but also a description and value of the collateral securing the debt. For example, you may have a mortgage loan secured by your house, a car loan secured by your vehicle, or other purchase money loans secured by jewelry, household appliances or furniture. You will also be required to file a form known as a “statement of intentions,” on which you will indicate whether you intend to keep or surrender the collateral securing those debts. For any property you wish to keep, you usually indicate on your statement of intention whether you want to surrender the collateral (give it back), redeem the collateral (pay a lump sum based on the collateral’s current value) or reaffirm the debt (signing a reaffirmation agreement to keep the property and keep paying on it). An experienced Morris County bankruptcy attorney can assist you with all aspects of filing Chapter 7 bankruptcy, including making decisions about secured debts and whether or not you should sign a reaffirmation agreement for any of them.
A reaffirmation agreement is a binding contract between you and a creditor, and you should not enter into one without the advice of a qualified bankruptcy attorney. When you sign a reaffirmation agreement, the debt is not subject to the bankruptcy discharge you legally obligate yourself to pay the debt after bankruptcy. That means if you fall behind on payments under the reaffirmation agreement, the collateral can be repossessed. Also, when you surrender property through a Chapter 7 bankruptcy, the deficiency balance is discharged; however, if you reaffirm a secured debt, later fall behind on payments and lose the property to repossession, the deficiency balance is not discharged. For these reasons and others, it is important to retain a knowledgeable Morris County bankruptcy lawyer to represent you in your bankruptcy case, so you can make informed decisions and avoid costly mistakes.
Reaffirmation agreements are voluntary. You are not required to sign one, though depending on the particular circumstances of your case, it may be in your best interest to do so. A qualified bankruptcy attorney not only works to protect your rights when negotiating reaffirmation agreements with your secured creditors, but also ensures you adhere to all filing requirements and deadlines if you do decide to reaffirm a debt. To learn more about how different types of debt are treated in both Chapter 7 and Chapter 13 bankruptcy, contact a dedicated Morris County bankruptcy attorney today.