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What is a reaffirmation agreement?

Posted on Mar 30, 2009 in Bankruptcy procedures, Chapter 13, Chapter 7

When you file a bankruptcy case, you need to make some decisions about your secured loans.  These are loans secured by your house, your car or other personal property.

When you file your bankruptcy case, you must make a Statement of Intention for each of your secured loans.  The law offers three options.  These are:

  • Reaffirmation
  • Redemption
  • Surrender

Reaffirmation means that you intend to continue paying the secured debt just as before.  More importantly, it means that you agree continued personal liability for the debt.  Normally, bankruptcy eliminates all personal liability on debts, including secured debt.

Redemption means that you will pay the secured debt by paying the creditor cash equal to the value of the property securing the debt.  For example, if your car is worth $10,000, you could pay $10,000 to satisfy that debt in full even though you owe much more.  Even if you don’t have the cash, you can redeem a late model car through a specialized lender.  We can help you with this.  

Surrender means that you don’t intend to pay the debt and are willing to give up the collateral.  This might be a good idea for a car worth $10,000 when you owe $25,000 on it.  It is also the typical choice when facing foreclosure on a house you can’t afford to keep.

Reaffirmation isn’t always a good idea.  You could continue to pay a mortgage debt on a house without reaffirming.  The lender has to accept payments as long as you aren’t in default.  If you default later, you won’t have personal liability.   Reaffirmation isn’t a good idea if you might not able to pay the loan in the future.

However if you don’t reaffirm, redeem or surrender in the case of a car loan, you’ll probably find that the car will be repossessed.  

You’d be surprised to find that items like jewelry, computers and electronic equipment often are security for payment of a debt.  When this happens, please tell us about it.  We have to deal with these situations on a case by case basis with the lenders.  

We charge you a little extra for reaffirmation agreements.  That’s because we have to certify to the court that you are able to pay without it being a substantial hardship.  We also try to negotiate better terms for you whenever possible.  Lakelaw wants to give you good value in all aspects of your bankruptcy case.  

This is a technical area of bankruptcy law.  This blog is not the place to describe all of the details.  But Lakelaw wants you to be informed and ask questions about how to proceed in your particular case.


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