Why Reaffirming Debts May Be the Right Move

Apr 28, 2015

When a debtor files for bankruptcy, there is a high probability that their debts will be dismissed. Therefore the creditor can no longer pursue the debts. However, the debtor can still choose to pay the creditor if both enter into a reaffirmation. This creates a new arrangement between both parties which is no longer bound by the previous bankruptcy discharge. It may seem counterintuitive to think that a debtor would want to pay certain creditors if they are no longer obligated to, however there are some legitimate reasons for debtors to continue to pay their creditors.

Keep the Property. Debtors may want to keep the property that is being used as collateral for a particular debt. When a person files for bankruptcy, it is not guaranteed that they can keep the property if the creditor still has a stake in it. By reaffirming the debt, individuals are able to keep the property as long as they continue making payments.

Save the Co-Signer. Reaffirmation may occur if there is a co-signor on a loan who will be responsible for making payments if the debtor does not. Most of the time, the true debtor continues to make payments on the loan because they believe it is the right thing to do.

Non-Dischargeable Debt. If the creditor claims that you misled the organization into obtaining the loan, you may want to continue payments until the dispute is settled, otherwise you may have to pay the whole debt if the creditor wins the dispute.

How Do I Reaffirm a Debt?

The time to reaffirm a debt is short. The arrangement also has to meet certain legal guidelines. Debtors must reaffirm a debt before the court grants a discharge. But creditors may also choose to engage in voluntary repayment. This means you still can make payments on a debt even though you are not obligated to do so. This doesn’t require court approval.

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