Back To Basics Education Series: Reaffirmation and Bankruptcy

by Jack Morrison on September 23, 2011

This is the third week in our special “Back to Basics” education series in honor of back to school. Understanding the four basic topics of bankruptcy covered in this series is important. As a Worcester bankruptcy attorney, these critical concepts are important to help my clients understand their financial situation and make decisions about moving forward. The topics are:

  1. Chapter 7
  2. Chapter 13
  3. Reaffirmation
  4. Life After Bankruptcy

Now let’s explore our next topic: Massachusetts bankruptcy and reaffirmation. 

Massachusetts Bankruptcy and Reaffirmation
When you file for bankruptcy and receive a discharge, it means that you’re not legally responsible to pay the debt listed in your petition. The discharge in Bankruptcy gives you a fresh start financially.

A Reaffirmation is a legal concept that re-establishes your obligation to pay, even after you file Bankruptcy and receive your discharge.

Let’s use an example to explain this.

In a Ch 7 bankruptcy process, if you have a car loan and can’t make your car payments, you have 2 choices: either you get current with your car payments, or you surrender the car. In either case, under a Chapter 7, you have no legal obligation to pay the debt. You can surrender the car and don’t have to worry about a deficiency ( a deficiency is when the auto loan company repossess your car, sells it, and sues you for any outstanding loan balance). IF YOU WANT TO KEEP YOUR CAR, YOU HAVE TO MAKE TIMELY PAYMENTS.  Otherwise, the auto loan company can ask the Bankruptcy Court for relief from Bankruptcy Court and repossess the car.

The reaffirmation is an agreement between you and your creditor that legally obligates you to repay the loan…even after you filed Bankruptcy. The creditor can’t force you to sign the reaffirmation agreement.   If you have an attorney representing you, your attorney must sign as well. The Bankruptcy Court has to approve all reaffirmation agreements.

I NEVER have a client sign a reaffirmation agreement.  It’s not in their best interest to do so. I always tell my clients, “if you want to keep your car, keep making regular timely monthly auto loan payments.”

Next week, stay tuned as we discuss life after bankruptcy.

Do you have questions about your financial situation? Then you might want to sit down with a knowledgeable Worcester bankruptcy lawyer. Call my office, the Law Office of Jack Morrison, today at 508.852.7800 or reach out via our contact form. Thank you.

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