Reaffirming a Debt in Bankruptcy

A debt reaffirmation agreement is an agreement made between the debtor and a creditor that prevents a debt discharge that would otherwise come about in the bankruptcy proceeding. There are many reasons why you may choose to reaffirm a debt, even if you can eliminate it through a bankruptcy discharge.

A very common reason to enter a debt reaffirmation agreement is to keep a property that serves as collateral for a debt, such as a house or a car. If you have some equity in the house or car you may be able to keep them in bankruptcy. In case there is no extra equity that can be used to repay creditors, the bankruptcy trustee will not be interested to liquidate a property.

A debt reaffirmation means that the loan will continually be paid and in return the creditor will not take the collateral of the loan. You may want to keep paying a loan if you have a guarantor or co-signer who must pay the debt if you don’t. If your lender or creditor is related to you, you may also want to reaffirm a debt. It is common for debtors to feel that repaying their creditors, especially those who are related to them, is the proper thing to do regardless of the circumstances.

Lastly, you may want to reaffirm a debt because your creditor claims that the debt is not dischargeable. This might be the case where your creditor claims that the debtor committed fraud in order to get the loan. That’s why instead of taking a chance on retaining the full amount of debt after the bankruptcy case, the debt can be reaffirmed partially to work out the dispute.

Reaffirmation agreements must comply with rigid regulations and they usually involve obtaining the bankruptcy court’s approval. The time frame to reaffirm a debt is constrained. A debt has to be reaffirmed before a discharge is granted and the case closes. There is a 2-month period from the date of signing the reaffirmation or until the discharge, whichever requires lesser time, to withdraw from a reaffirmation deal.

There is a standard procedure for reaffirming a debt. The agreement must be filed with the bankruptcy court. The approval of the court will not be required if your Bankruptcy Attorney San Antonio has arranged the agreement and submitted supporting documents guaranteeing that the reaffirmation is voluntary, does not lead to undue hardship on you and your dependents, and you have adequate income to make the payments.

If you do not have a lawyer, filing a motion for approval is mandatory. The bankruptcy court will evaluate your motion and the reaffirmation agreement at a discharge hearing. Usually, the court makes the decision whether to allow the agreement during that time.

The bankruptcy law clearly states that the debt reaffirmation guidelines do not prohibit any voluntary repayment. Voluntary repayment simply means that a debt would be paid despite the fact that you are no longer legally responsible to do so. You can pay back a loan from a creditor if you feel morally responsible to do it. This will not require a court’s approval.

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