For many filing Chapter 7 bankruptcy, the idea of losing assets can be incredibly overwhelming. However, it’s important to understand that you have legal options during these times. One such choice is to create a reaffirmation agreement with a creditor. If you’re unsure what this is or whether or not it’s right for your bankruptcy case, you’ll want to keep reading. The following blog covers these matters in further detail and explores the importance of connecting with an Orange County Chapter 7 bankruptcy lawyer.
What Is the Function of a Reaffirmation Agreement?
When you file for Chapter 7 bankruptcy in New York, it’s important to understand that this process can put your assets at risk. This bankruptcy process requires your nonexempt assets to be liquidated to repay creditors for outstanding debts. However, some debts are secured, meaning they have collateral attached. These debts include mortgages or auto loans. As such, if you are in debt, you may find that your home can be foreclosed and your car can be repossessed to satisfy the debt to these lenders. Because many are worried about what will happen to their property, they may pursue a Chapter 13 filing instead which involves a repayment plan in exchange for keeping assets.
If you create a reaffirmation agreement, you can retain the asset in exchange for paying the outstanding debt. This process allows you to “reaffirm” or work out new terms and conditions for repayment. In some instances, you may be able to negotiate a lower outstanding total in exchange for higher monthly payments or increased interest rates. Regardless, the main benefit of this process is that it allows you the opportunity to retain assets like a car or home.
The actual agreement you sign will contain information regarding the debt and payment plan, including the outstanding total, details about the collateral, and the terms and conditions of the repayment plan. You must request this agreement within 60 days of the meeting of creditors, and the creditor with whom you are looking to reaffirm a debt must agree to the contract.
Do I Need to Sign One in New York?
If you are filing for bankruptcy, it’s important to understand that whether or not you need to create this kind of agreement will depend on the circumstances of your case. You’ll need to determine whether or not this kind of plan is viable for your finances in addition to the other financial obligations you have. If you can fulfill the terms and conditions of the agreement, it may be in your best interest to sign one. However, you should never enter into any agreement without first consulting an experienced bankruptcy attorney to explore your legal options.
You should note that if something were to happen to collateral at the center of the affirmation agreement, you would still be responsible for making payments. For example, if you create a reaffirmation agreement with your auto lender, and then total your car a few months into the agreement, you are still legally responsible for making payments in accordance with your contract.
As you can see, entering into a reaffirmation agreement during bankruptcy is not a decision that should be made lightly. If you’re unsure whether or not this is right for you or want to ensure that an agreement represents your best interests, working with an experienced bankruptcy attorney is imperative. At the Law Offices of Michael D. Pinsky, P.C., we understand how complicated these matters can be, which is why our team is dedicated to making bankruptcy as simple as possible for filers. When you need help, our firm is here. Contact us today to learn more.
