Can a judge deny my reaffirmation agreement?
Yes, a Judge can deny a reaffirmation agreement even if it is a voluntary agreement between lender and borrower. We discussed the basics of reaffirmation agreements in this post , and we also have posts about car reaffirmations and house reaffirmations .
What should I expect at my reaffirmation hearing?
- What do you think your car (or other property) is worth?
- Can you afford to make the monthly payments under the reaffirmation agreement?
- Has your income or expenses changed since filing your case?
- Do you receive help from your friends or family to make the payments on this debt?
- Have you ever missed a payment on this debt?
Should you reaffirm a mortgage in bankruptcy?
You can’t reaffirm your mortgage once the bankruptcy case is over without jumping through some additional hoops. You’re going to need to make a motion to the bankruptcy court to reopen your case for the limited purpose of entering into a reaffirmation agreement. Some courts will allow you to do so, others will not permit it.
Can I reaffirm my mortgage in a Chapter 7 bankruptcy?
Rather than voluntarily making payments on the mortgage after you file your Chapter 7 bankruptcy case, you or your lender may look at a process called reaffirmation. Reaffirmation is a legal term, but it loosely means a new promise to repay a debt after bankruptcy that otherwise would be wiped out.
What happens after a reaffirmation agreement?
Once the court has approved the reaffirmation agreement, the filer's personal liability on the car loan survives the entry of the discharge. If all remaining payments on the loan are paid in full, then it's essentially as though the bankruptcy never happened.
Why do people choose to reaffirm particular debt?
Advantages to Reaffirmation of Debt Reaffirming a debt allows you to keep the property securing the debt, which can be a real advantage in some cases. It also allows you to avoid having to come up with a lump-sum payment to keep the property.
What happens when you reaffirm a debt?
Reaffirming a debt informs the lender that you intend to continue to pay the loan. Generally, the lender will continue to report the loan and all payments made on that loan to the credit reporting agencies, which may help improve your credit score after bankruptcy, provided timely payments are made on the loan.
Can I keep my car without reaffirming?
Despite what you might have been told by your creditors, you may not have to sign a reaffirmation agreement on your car loan in order to avoid repossession or to rebuild your credit score after filing for bankruptcy.
What happens if a reaffirmation agreement is denied?
If the Court denies the reaffirmation agreement, you are in technical default again. This is part of the trade‐off between Chapters 7 and 13. In exchange for a quick, efficient, inexpensive discharge of your debts, you give up control over the actions of creditors.
What happens if you default on a reaffirmation agreement?
You will be stuck with the payments. If you can't make the payments, the creditor can repossess the property in which it has a security interest (the collateral), can sell it, and may sue you for a judgment for the difference between the amount that is receives on the sale and the amount that you owe on the loan.
Is a reaffirmation agreement necessary?
No, you are not required to reaffirm a debt by any law. Only agree to reaffirm a debt if it is in your best interest. Be sure you can afford the payments that you agree to make.
Does reaffirming help credit?
Reaffirming Helps Rebuild Your Credit So timely payments won't help you establish a good credit history after bankruptcy. If you reaffirm the loan, your lender will continue reporting payments.
What does reaffirmation of debt mean on credit report?
Reaffirming a debt informs the lender that you intend to continue to pay the loan. Generally, the lender will continue to report the loan and all payments made on that loan to the credit reporting agencies, which may help improve your credit score after bankruptcy, provided timely payments are made on the loan.
Who files the reaffirmation agreement?
It's not even necessary to have one if you want to voluntarily repay a debt instead of including it in your bankruptcy. It's also important to note that reaffirmation agreements can be filed only by the debtor, so you don't have to worry about a creditor coming to you with an agreement.
Can you negotiate a reaffirmation agreement?
Throughout the reaffirmation process, you may be able to negotiate more favorable terms. Reaffirmation is a new contract between you and the creditor, and need not mirror the terms of your original agreement.
Why did my car loan disappeared from my credit report?
An auto loan could be missing from your credit report because the information hasn't yet been reported to the credit bureaus, your lender doesn't report to all credit bureaus or an error has occurred.
What are the reasons that a borrower goes into default?
A default occurs when a borrower stops making the required payments on a debt. Defaults can occur on secured debt, such as a mortgage loan secured by a house, or unsecured debt, such as credit cards or a student loan. Defaults expose borrowers to legal claims and may limit their future access to credit.
What are the benefits of debt restructuring?
Benefits of Debt Restructuring Free up your cash: deferment and /or reduction in installments/ interest rate free up the immediate cash and avoid mismatches. Reduced interest rates: existing loans may be at a higher interest rate because your firm was in urgent need of funds.
Why do some borrowers default on loans?
There are two prevailing theories of borrower default: strategic default—when debt is too high relative to the value of the house—and adverse life events—such that the monthly payment is too high relative to available resources.
Why do people default on mortgages?
(2010) suggest two possible forces. One is a lack of liquidity – homeowners no longer have the ability to pay their mortgage because they have suffered a significant negative income or expenditure shock. The other is negative equity, often referred to as 'strategic default'.
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What is reaffirmation?
The purpose of bankruptcy is to discharge some or all of your debts so you no longer have to make payments. But in some cases, you may want to reaffirm a certain debt, agreeing to repay some or all of what you owe instead of requesting to have it canceled.
Can you file a reaffirmation agreement after discharge?
Once a discharge order has been entered in your bankruptcy case, you can no longer reaffirm any of the debts that were included in the discharge agreement. The same goes for if your case has been closed by the court.
The bottom line
If you’re going through bankruptcy, a reaffirmation agreement allows you to agree to pay some or all of certain debts that you have. This process will remove that balance from your discharge, but it can help mitigate the damage by the bankruptcy to your credit score and also allow you to hold onto the collateral on the loan.
When should a reaffirmation agreement be filed?
The reaffirmation agreement should be filed with the court only after all information is completed and signed by the debtor (s) and the creditor in Part III, and the attorney for the debtor (s) in Part IV, if the attorney represented the debtor (s) during the negotiation of the agreement.
What is a Chapter 7 reaffirmation agreement?
Answer: An agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral (i.e. the car) that would otherwise be subject to repossession. The party filing a reaffirmation agreement is required to also file a "Reaffirmation Agreement Cover Sheet.".
What If a Reaffirmation Agreement Is Violated?
As such, a violation can occur if the borrower fails to make repayments as specified in the agreement. A violation may result in the lender repossessing some of the borrower’s property. If repossession does not fully cover the debt owed, the lender may sometimes file a personal judgment against the borrower in order to obtain the remaining amounts.
Why Would a Debtor Sign a Reaffirmation Agreement?
When a debtor signs a reaffirmation agreement, the debtor is in essence executing a reaffirmation of debt with the creditor. Thus, a reaffirmation agreement essentially reinstates the borrower’s obligation to repay the debt in full. In return, the lender promises not to foreclose on the borrower’s property, or to repossess any property that has previously been designated as collateral on a debt. This promise remains in effect so long as the borrower continues to make good on their scheduled payments.
What If the Debtor Continues Making Payments without Court Approval?
The debtor may sometimes continue making payments during bankruptcy, and the creditor does not repossess the property. The parties act as though the debtor never filed for bankruptcy; in many respects, the debtor has an informal reaffirmation agreement during the bankruptcy itself.
How long does it take to cancel a reaffirmation agreement?
In some cases, the debtor must be able to cancel the reaffirmation agreement within two months of filing with the court. Debtors must be granted sixty (60) days in which to revoke the agreement. After that time period, the debtor must accept the consequences.
Why are ride through agreements controversial?
Ride-through agreements are controversial due to the fact that they operate outside of the sanction of the Bankruptcy Code. Additionally, the debtor may be foregoing opportunities in which they could lower the amount they must pay.
How to reaffirm a debt?
To ensure that creditors do not defraud their debtors, reaffirmation agreements must be: 1 In writing; 2 Filed with the court; and 3 Certified by the debtor’s attorney
Can a lender violate a reaffirmation agreement?
Likewise, a lender may violate a reaffirmation agreement by attempting to enforce collections, or by taking actions that are not covered in the agreement. Additionally, the use of fraud or misrepresentation in order to gain the borrower’s agreement may lead to legal action. Such behavior could be considered coercion and may result in judgment against the lender.
What is a reaffirmation agreement?
A reaffirmation agreement is an agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral ( i.e. the car) that would otherwise be subject to repossession. Reaffirmation Agreements are strictly voluntary, ...
Do reaffirmation agreements require bankruptcy?
Reaffirmation Agreements are strictly voluntary, and in some instances, require the approval of the bankruptcy judge. For information regarding The Reaffirmation Project, click HERE.
What is a reaffirmation agreement?
A reaffirmation agreement is a contract between a debtor and a creditor to keep the creditor’s debt out of the bankruptcy. This means that the debt in question will not be discharged, and you will have to repay it after the bankruptcy. In effect, signing a reaffirmation agreement puts you back on the hook for the debt.
Why can reaffirmation agreements be bad for creditors?
Because insisting on the reaffirmation agreement is often a losing game for creditors, many creditors will simply allow the debtor to keep making the normal payments and keep the collateral.
What is the penalty for failing to sign a reaffirmation?
This is because the only penalty for failure to sign the reaffirmation is that the creditor might repossess the collateral securing the loan.
What happens if you don't sign a reaffirmation agreement?
The main downside of not signing a reaffirmation agreement is that the lender will often deny you access to online account records.
Can a creditor sue you for a reaffirmation agreement?
If you sign a reaffirmation agreement and one of these happens , then the creditor can sue you to collect the balance.
Are reaffirmation agreements necessary?
Reaffirmation agreements, although required by the bankruptcy laws for every secured debt that the debtor will continue to pay, are often not necessary in practice.
How long does it take to get a reaffirmation agreement?
A reaffirmation agreement must be filed within 60 days after the meeting of creditors date. Reaffirmation agreements are voluntary. They are not required by the Bankruptcy Code or other state or federal law. After bankruptcy, a debtor can voluntarily repay any debt rather than sign a reaffirmation agreement, but since October 2005, there may be valid reasons for signing a reaffirmation agreement (at least in regard to vehicles).
What happens if there is no attorney for a reaffirmation?
If there is no attorney, the Court usually wants to meet with the debtor to make sure the debtor knows that the reaffirmation is voluntary. If a judge does not believe that a reaffirmation agreement is in a debtor’s best interest, the judge may refuse to allow the reaffirmation agreement to be entered as a binding agreement.
Can you reaffirm a debt after bankruptcy?
After bankruptcy, a debtor can voluntarily repay any debt rather than sign a reaffirmation agreement, but since October 2005, there may be valid reasons for signing a reaffirmation agreement (at least in regard to vehicles). Attorneys can certify for their clients that signing a reaffirmation is not a hardship for their client.
What Is the Purpose of a Reaffirmation Agreement?
When the debtor signs the reaffirmation agreement, they agree to repay the debt on the loan to keep the property, usually a house or car. A reaffirmation agreement effectively removes the specified property from everything else that will be sold to pay off debt.
Why do debtors cancel reaffirmation agreements?
There are many reasons why a debtor may want to cancel a reaffirmation agreement. Most occur because holding onto the debt is no longer financially feasible; some examples include:
How long does it take to reaffirm a loan?
If you decide you want to sign a reaffirmation agreement with your lender, you must file it within sixty days of the First Meeting of Creditors. However, even if your lender agrees to reaffirm your loan, the bankruptcy judge still must approve the contract. Rejection is likely if the judge feels that your post-bankruptcy financials won't satisfy the loan terms.
Pros and Cons of a Reaffirmation Agreement
The purpose of bankruptcy is so debtors can sever ties between debt owners and themselves. However, there are situations where some debt is necessary, such as mortgages and car notes.
Pro: Debtor will maintain payment history
By keeping your car and mortgage through bankruptcy, debtors can keep building positive payment history, which will help once they reestablish credit down the road.
Pro: You end up with real property
Why reaffirm debt when there’s no benefit? You’ll undoubtedly want your car, which means the end result of paying that debt down is you’ll receive the title. Same with mortgage.
Con: You cannot walk away from reaffirmed debt
Once you’ve locked yourself into a new contract with a creditor, you’re stuck with it until the end. You cannot renege on your contract after the bankruptcy as potential civil liability may befall. Therefore, choose which debt is worth keeping through your bankruptcy, and what debt can be paid for with your stated income.
How to start your agreement
Should you wish to reaffirm debt, your attorney will guide you through the form to sign. You may need to notarize the agreement before having it filed in court. Essentially, you may or may not attend a reaffirmation hearing depending on whether the company decides to accept or reject your agreement.
