Tag Archives: Reaffirmation Agreements

I Signed an Auto Loan Reaffirmation Agreement in my Chapter 7 Bankruptcy, So Now What?

A reaffirmation agreement is, as I’ve written here before, a separate agreement that you may have the option to sign in a Chapter 7 bankruptcy that, essentially, puts you back on the hook for the “reaffirmed” debt as if you had never filed for bankruptcy at all. A Chapter 7 bankruptcy discharges ALL debts owed (except for those deemed to be non-dischargeable by the US Bankruptcy Code, such as child support arrearages or most tax debts, among others), flat-out, unless a debt is “reaffirmed.”

The reaffirmation agreement is a form document with contractual terms of the loans filled in that is provided by a creditor after filing and which requires the your signature, your attorney’s signature IF there is no “undue hardship” (more on this below), and the creditor’s signature. Once signed, it is provided to the creditor, and it is the creditor’s job to file it with the court. If filed and approved, you will be obliged to pay the debt regardless of the bankruptcy.

In most cases, I do not recommend that my bankruptcy clients here in Michigan sign reaffirmation agreements.

Continue reading

Why Reaffirming Mortgages Is a Very Bad Idea

Guest Post by Michael Goldstein, attorney in Massachusetts.

You are in a Chapter 7 bankruptcy to eliminate your overwhelming debt, not to put yourself back on the hook for it.

Click here to read more about why reaffirming mortgages is a very bad idea in a guest post by Massachusetts Attorney Michael Goldstein on the new Michigan Bankruptcy Blog of Michigan Bankruptcy Attorneys The Hilla Law Firm, PLLC.

 

 

A Hidden Advantage of Not Reaffirming: the Freedom to Move

Guest Post by Atlanta Bankruptcy Attorney Peter Bricks.

A reaffirmed mortgage is a mortgage that you remain stuck with just as much after a Chapter 7 bankruptcy as you were before the Chapter 7 bankruptcy. A non-reaffirmed mortgage after a Chapter 7 bankruptcy, on the other hand, is a mortgage you can walk away from if you need to.

To read more, click here to read our full article about the advantages of not reaffirming a mortgage in Chapter 7 bankruptcy in Michigan on the new Michigan Bankruptcy Blog of Michigan bankruptcy attorneys The Hilla Law Firm, PLLC.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

Home Short Sale After Chapter 7 Bankruptcy: Why They Often Don’t Go Together

Guest Post by Atlanta Bankruptcy Attorney Peter Bricks.

Guest poster Atlanta Bankruptcy Attorney Peter Bricks has serious concerns about the efficacy of attempting a short sale of a home after a Chapter 7 bankruptcy.

To read more, click here to access Attorney Bricks’ full article on this subject on the new Michigan Bankruptcy Blog of The Hilla Law Firm, PLLC.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact attorney John Hilla at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

Did I Reaffirm my Mortgage Debt in My Bankruptcy?

A reaffirmation of a mortgage in Chapter 7 bankruptcy is nearly always a bad idea. Michigan law already protects you from foreclosure if your payments remain current, and the reaffirmation agreement will put you “back on the hook” for tens or hundreds of thousands of dollars in mortgage debt where your Chapter 7 discharge would have otherwise technically discharged the debt, allowing you to truly walk away “free and clear” if your circumstances worsen in years to come.

To read more about this topic, click here to read our full article concerning mortgage reaffirmation agreements and Chapter 7 bankruptcy on the new Michigan Bankruptcy Blog of The Hilla Law Firm, PLLC.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

What Happens to my 2nd Mortgage if I File for Bankruptcy?

I have recently seen a few second mortgages “reaffirmed” in bankruptcy by some of my fellow bankruptcy attorneys. However, in Michigan, as I’ve described here, there is no reason to file what is called a reaffirmation agreement for a mortgage debt when you file a Chapter 7 bankruptcy. So long as you are current on your mortgage payments, you will likely have no issue with retaining your home (although there is the possibility that, if it is an especially “luxurious” home, the Bankruptcy Trustee appointed by the court to your case may see retention of the home as an issue of “good-faith” in your bankruptcy filing).

Continue reading

Can I Reaffirm My Car in a Chapter 7 Bankruptcy?

This question seems to have been on a lot of people’s minds recently. Nearly every potential client who has contacted me in the past week has had a question about whether or not they could retain secured property such as a home or car if they filed a Chapter 7 rather than a Chapter 13 bankruptcy and, if so, how they could do it. As I’ve discussed previously on this blog, it’s a particularly pertinent question here in the metro Detroit area of southeast Michigan because of the area’s lack of viable public transportation. Fortunately, there are a few different ways to retain possession of one’s vehicle through the Chapter 7 process, although not all of them may be for the ultimate good of the debtor.

First, in a Chapter 7 bankruptcy, it is possible to keep a car without striking a reaffirmation agreement with the loan lender. This is possible if you own the car outright and are not currently making payments to an auto loan lender on the vehicle. If that is the case, it may wholly or partially fit into either the state or Federal exemptions available.  Under the Michigan state exemptions, currently, $2775.00 may be exempted for an automobile. (Note that “exempted” means that this property or that dollar-value’s worth of property may be “exempted” from the bankruptcy estate that is created legally when a bankruptcy petition is filed and which contains all of your property except that property that is “exempted.”) So, if you own your car outright and its fair-market value is $2775.00 or less (as of this writing), it is simply property wholly owned by you that you may exempt. Under the Federal exemptions, which are used alternatively to state exemptions, the vehicle exemption limit is currently only $2440.00.

Second, a car may be “redeemed” in a Chapter 7 bankruptcy. In redeeming property during a Chapter 7 filing, the debtor makes a lump-sum payment to the creditor for the total fair-market value of the property. This allows the debtor to retain the vehicle free and clear of the obligation to make any future payments, during or after the bankruptcy process. However, many prospective Chapter 7 debtors do not have a sufficient lump-sum available at the time that the bankruptcy petition is filed, and, thus, redemption is not always a viable option.

Third, if you do not own your car outright and are currently making payments on it, it may indeed be reaffirmed in a Chapter 7 filing—but with some caveats.

A “reaffirmation agreement,” first, is an agreement that is struck between the debtor filing for bankruptcy and the automobile loan-provider (or home-loan mortgagee) stating that you are reaffirming the debt you owe to that loan-provider and that you intend to continue paying it either as-is or with modified terms. The reaffirmation agreement keeps the property in question and the terms of payment surrounding it out of the bankruptcy estate.  The agreement, essentially, stipulates that the debtor agrees to continue to be held liable for the full amount of the agreement, even after the bankruptcy discharge occurs, while the creditor agrees to refrain from repossessing the vehicle.

The reaffirmation agreement must be signed before the discharge takes place, and it must be filed with the bankruptcy court. If the debtor is represented by an attorney in his or her bankruptcy filing, the attorney must also sign the agreement, stating that he or she believes that the agreement will not pose an undue hardship to the debtor, and the attorney must further attest that the agreement was signed by the debtor voluntarily and free of any undue influence. If the debtor is not represented by an attorney, the bankruptcy judge must approve the agreement. Additionally, the debtor must file with the court a statement of income showing that remaining disposable income, after the bankruptcy, is sufficient to make the payments required by the reaffirmation agreement.

As to the caveats, there are many. Many attorneys will not sign a reaffirmation agreement for their clients—ever. The primary reason for this is that, when you sign a reaffirmation agreement, you deprive yourself of the opportunity to fully enjoy the protections provided by bankruptcy. It is possible that, at the time you sign a reaffirmation agreement, you feel that you are fully able to handle the continued payments after the bankruptcy discharge. However, hard times may roll around a second time, and you may find yourself unable to continue making those payments at some point after the discharge (and well before the 8 year time-span required between Chapter 7 bankruptcies lapses). At that point, the creditor may not simply repossess the vehicle but will also be able to pursue you to collect the entire amount of the loan—all of which would have been discharged in the bankruptcy without the reaffirmation agreement.

There are ways around this sticky system, however, that an experienced bankruptcy attorney can guide you through to the best possible result.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.