Millions of Americans are struggling financially, and if you are one of them, you might be wondering what the best solution to your debt is. Many people consider bankruptcy to get them out from under smothering debt, but you may be thwarted by the fear that you will be forced to liquidate your property and worries about your credit.
You should be comforted to know that bankruptcy exemptions available to filers in Minnesota are often more than enough to protect personal property. While it is true that bankruptcy can impact your credit score, you can start rebuilding your credit score by reaffirming on certain debts such as home mortgages and car loans.
To determine whether reaffirmation is right for you, you should consult with a knowledgeable bankruptcy attorney. Read on to learn more about the reaffirmation process.
What is debt reaffirmation?
Once your bankruptcy has been filed with the court, an automatic injunction goes into effect that bars creditors from contacting you. This includes lenders, such as those for your home mortgage and car payment.
Debt reaffirmation is an agreement signed after a bankruptcy has been filed that makes you liable for the debt once more. There are two advantages to reaffirming on secured debts, such as a home mortgage or an auto loan.
First, the lenders can send you statements again, making it easier to keep track of your debts and ensure you do not miss payments.
Second, the payments you make to lenders for these items will be counted on your credit report and can be used to rebuild your credit after bankruptcy has been filed.
Debt reaffirmation agreements must be signed after bankruptcy has been filed, but before debts have been discharged and the bankruptcy is complete.
Reaffirmation is a voluntary agreement
Reaffirmation is a voluntary agreement. You do not have to sign one. Even if you do not sign a reaffirmation agreement, you may continue to keep your home or your car provided you continue to make payments on them. The difference is that if you do not sign a reaffirmation agreement, any payments you make will not help you rebuild your credit.
Individuals may choose not to sign a reaffirmation agreement for a few reasons. If you do not sign, and are unable to pay your mortgage or car note, the lender may repossess the collateral, but you would not be liable for any deficiency balance.
Who is eligible for reaffirmation?
Reaffirmation is an option for people pursuing either Chapter 7 or Chapter 13 bankruptcy. If you are considering either of these, it is best to research all of your options. Bankruptcy is one way to effectively relieve debt if you have come to a point where you are unable to continue paying your creditors.
Before you decide if they are right for you, you should take the legal consequences of bankruptcy and debt reaffirmation into consideration. Contact a bankruptcy lawyer for more information on your options.