Facts about Chapter 7 and reaffirming debt to keep the property
When New Yorkers have smothering debt they cannot pay back, they think about various solutions to the problem. Some fear bankruptcy amid the belief that it can be permanently damaging. However, bankruptcy is a viable solution to get out of debt and restart a financial life free of the constant calls, letters and messages from creditors and aggressive debt collectors.
One question people have is whether they need to give up all their property when filing. In some instances, they can reaffirm a debt to keep the property and continue paying what they owe.
What should I know about reaffirming a debt under Chapter 7 bankruptcy?
There are two main types of consumer bankruptcy: Chapter 7 and Chapter 13. Those who want to simply clear the debt as quickly and efficiently as possible while potentially surrendering some property in exchange for their elimination often prefer Chapter 7 liquidation. This gets rid of unsecured debt like credit cards and medical bills. If the person owns a home or a motor vehicle above a certain value, they might need to surrender it.
Despite that, people will decide the positives of debt elimination outweigh losing a piece of property and move forward. It is important to remember, however, that it is possible to reaffirm a debt. With the reaffirmation agreement, the debtor will continue paying for the property despite it potentially being discharged in the case. In exchange, the creditor does not repossess it.
The agreement itself must meet specific criteria. The debtor must be entering into the agreement on a voluntary basis. It cannot place too significant a burden on them and their family. If the expense is large and does not help them get on better financial footing than they would be if they did not file bankruptcy at all, then it will not be allowed. The agreement must be in the debtor’s best interests. It can be canceled at any juncture prior to the discharge being issued or within 60 days of the agreement having been filed – whichever provides the debtor with the maximum time.
People who have reaffirmed a debt are expected to pay it just as they would without filing for bankruptcy. There is no discharge and the creditor can again begin legal proceedings to recover the property if there are still payments due on it. There can also be a judgment against the debtor.
Knowing the intricate details of bankruptcy can be complex and help is important
Chapter 7 bankruptcy is generally the quickest and easiest pathway for people without a lot of property to get out of debt. Even with that, there may be items the person wants to retain and is thinking about reaffirming that debt as part of the case.
Understanding how to do this as well as being fully cognizant of all other aspects of a bankruptcy filing generally requires professional guidance. For assistance, it is useful to call those who have experience in these cases and can give comprehensive advice with the proper chapter to file under, if a reaffirmation is a wise step and more.