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Reaffirmation Agreements

By: Julie Koenig

If you have a vehicle that is financed and you want to keep the vehicle, you will be required to reaffirm that particular debt.   By reaffirming a debt you agree that you remain legally obligated on that particular debt and must repay it in order to get clear title to the vehicle when it is paid off.   You must reaffirm any vehicle debt within 60 days from your 341 meeting.   You have an additional 60 days or until the date of your discharge to change your mind and revoke the discharge.  This must be done in writing.   Failure to reaffirm a vehicle debt will result in that vehicle being repossessed after you receive your discharge with no warning to you.   We work with the various lenders to obtain reaffirmation agreements prior to the 341 meeting.   That way we can sit down with you at the 341 meeting, explain the reaffirmation agreement and obtain your signature.   That way you don’t have to make a special trip to our office to sign - we strive to make this a simple a process as possible.

Houses do not have to be reaffirmed unless you desire to do so and the creditor will allow it.   Under the Bankruptcy Code home mortgages “flow through” the bankruptcy so unless it is important to you for purposes of rebuilding your credit post-discharge, we don’t recommend reaffirming a home mortgage.   If you do not reaffirm a home mortgage, the lien against your home will still be released when the mortgage is fully paid.   The only down side to not reaffirming a mortgage is that if you want to refinance post-discharge, the original mortgage company will not refinance the debt - you have to find a new mortgage company.   We can assist you in that process.

The reason that we don't recommend reaffirming a mortgage is two-fold:

  1. You have become legally obligated to repay a very large debt when it is not required; and,
  2. If you reaffirm the debt and are upside down or become upside down on the mortgage due to decreasing property values, you cannot just walk away - the mortgage company can sue you for any deficiency from the sale of the property. If you did not reaffirm the mortgage, you can walk away at any time without consequence.

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