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“Let s talk up for a moment or two about reaffirmation agreements. A reaffirmation agreement agreement is an agreement that you sign the puts you back on the hook. Legally the obligation that is being discharged by the bankruptcy proceeding for example. Let s say that you borrowed money to buy a car and you still owe 10000.
On that car and they have a lien against your car. The departmental motor vehicles if the cars were six thousand dollars. It might be better with regard to that secured creditor to simply surrender the car back to them your promissory obligation is being extinguished or discharged by the bankruptcy proceeding. But the lien still survives on the vehicle so in order to address that lean you have to give them the vehicle back surrender it pay them the fair market value of the vehicle.
Which is six thousand dollars and a lump sum or reaffirm on the data and here s where we talk about reaffirmation reaffirmation means that you re putting yourself back on the hook for the promissory obligation. And if you fail to make those payments after the bankruptcy discharge..
Then the creditor can sue you for a deficiency. If they take the car and sell it for three thousand dollars apply that to the ten thousand dollars. That so they could sue you again or sue you for a seven thousand dollar deficiency and that s not a good scenario. When you re trying to get a fresh start in bankruptcy.
I usually recommend that my clients never sign an unsecured reaffirmation agreement for an unsecured creditor. But with regard to the secured creditors. I don t like signing them i usually advise my clients against signing them. It s usually better to surrender the vehicle and go try to finance another vehicle or borrow a vehicle from somebody at work or in your church or a family member that has an extra vehicle by their garage that they re not using save up some money go buy a point a to point b piece of transportation and and get off of this this financing treadmill that we seem to be on as americans with our motor vehicles.
It s real important with a reaffirmation agreement that you understand that you have the right to rescind. It as long as you submit a writing to the court requesting that the reaffirmation agreement..
No longer be valid sometime. Before your discharge is entered in your case. Or within 60 days of the reaffirmation agreement having been filed with the court. Whichever of those two things come up latest.
So let s say that you sign a reaffirmation agreement on a car now let s talk about why it would be a good idea to sign a reaffirmation agreement if you owe two thousand dollars on a car and it s worth 6000. Fine let s sign the reaffirmation agreement there s no exposure there you re going to pay for or if you can t afford to make the payments. Anymore you can sell the vehicle to pay out that no no. Exposure let s say you owe.
10000 like in the. Example i gave before and the vehicles only worth 6000..
If the creditors willing to write down the principal amount if the creditor is willing to have the note be a six thousand dollar note. It makes sense to reaffirm on that on that debt as long as the vehicle is something that s dependable and you still want to keep it now there are other reasons if they will reduce the interest rate. If they ll change the payment or realities. The debt over a longer period of time there s lots of reasons.
Why we would consider it. But you ve got to if you have to move forward with great caution when you re talking about signing a reaffirmation agreement. Your attorney is an absolutely essential resource for determining whether or not you should sign a reaffirmation agreement. I strongly recommend that you consult your attorney before your thought you file your case to let your attorney know what your intentions are with regard to the secured asset.
We ve been talking about a car but it could be jewelry furniture electronics appliances well you would never want to reaffirm on a home there s a great dispute that s going on around the country mortgage lenders are reluctant to lend money to somebody on a home where the mortgage wasn t reaffirmed. But the law doesn t require to be reaffirmed eighty percent of the attorneys that i speak with think..
It s about practice to reaffirm on a piece of real estate for goodness sake. Don t bust. Your attorneys chops for indicating that you re not going to be supported in your desire to reaffirm on a piece of real estate. Because it is in your best interest to not leave.
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