In Chapter 7 bankruptcy, even if a debt can be discharged, you may have reasons to pay it. For example, according to the U.S. Department of Justice’s Trustee Program, perhaps you want to keep your car that you owe money for rather than turning it over to the trustee for the discharge of the debt. In some circumstances, a reaffirmation agreement with the bank in which you promise to repay the debt may allow you to do so. This agreement must be filed in bankruptcy court.
The reaffirmation agreement is only possible if it is entered into voluntarily, the Trustee Program states; it is not required by bankruptcy law. Additionally, it must not place an undue burden on you, and it must be in your best interest. Additionally, if you’re not represented by an attorney, a hearing must be held in order to determine if the reaffirmation agreement will be approved.
The danger of entering into a reaffirmation agreement is the inability to pay the debt. If that were to happen, the debt will not be discharged and the creditor may take actions such as a lien on the property you owe money on or the pursuit of legal action against you in court.
If you choose to enter into a reaffirmation agreement and then change your mind, you may cancel it any time before the court issues your discharge or within 60 days after the agreement has been filed in court — whichever is longer, the Trustee Program states.
If you’re considering filing Chapter 7 bankruptcy but you’re hoping to keep your property, Troy, Ohio Bankruptcy Attorney Chris Wesner can further explain the reaffirmation agreement and help you to determine if this choice is right for you. For more information, contact us.