{"id":53,"date":"2010-11-05T05:09:39","date_gmt":"2010-11-05T05:09:39","guid":{"rendered":"http:\/\/www.westcoastbk.com\/blog\/?p=53"},"modified":"2013-11-01T18:20:37","modified_gmt":"2013-11-01T18:20:37","slug":"why-sign-a-reaffirmation-agreement","status":"publish","type":"post","link":"https:\/\/www.westcoastbk.com\/blog\/2010\/11\/why-sign-a-reaffirmation-agreement\/","title":{"rendered":"Why Sign a Reaffirmation Agreement?"},"content":{"rendered":"

By Ryan C. Wood<\/a><\/p>\n

Generally, if you have secured debt when you file for bankruptcy, you have three options: 1) surrender, 2) redeem, or 3) reaffirm the debt. The 2005 bankruptcy reforms have made it difficult for bankruptcy lawyers<\/a> to provide advice regarding reaffirmation agreements. Prior to the 2005 bankruptcy reforms you could just keep making your normal car payment if you were current on the payments and wanted to keep the vehicle. Now bankruptcy attorneys<\/a> are asked to sign off on a reaffirmation agreement as to whether it is in the best interest of a client or not. <\/p>\n

The first option is self explanatory; you can surrender your property to your lender and not be liable for any deficiency relating to the surrender of the property in your bankruptcy case.<\/p>\n

The second option is to redeem your property for the fair market value of the property.\u00a0 This is advantageous if your debt is significantly higher than the fair market value of the debt.\u00a0 You would only have to pay what your property is worth, not what you owe to the lender.\u00a0 However, the only catch is that you have to pay the lender the fair market value of the property in one lump sum payment. Most people don\u2019t have that amount of cash readily available; however, there are companies out there that specifically help with redemption of properties after the filing of a bankruptcy petition.<\/p>\n

The third option is to reaffirm your debt.\u00a0 After the filing of your petition, if you have secured debt, such as debt for your house or vehicles, chances are, you may receive a reaffirmation agreement from your lender to reaffirm your debt.\u00a0 A reaffirmation agreement is a new contract that you sign after you have filed your petition that essentially indicates that you promise to continue making payments on your property.\u00a0 Although it is the current law that you must indicate your intention to either surrender or reaffirm your debt, it is normally not advisable to sign a reaffirmation agreement because you never know what the future holds.\u00a0 However, sometimes the lender makes the contract more attractive by either significantly lowering the interest rate or balance due on the remaining balance.\u00a0 If that occurs, it is up to you to weigh the pros and cons of signing a reaffirmation agreement.\u00a0 Better terms on the reaffirmation agreement is a great incentive to sign the reaffirmation agreement, but only do so if it does not present an undue hardship for you to pay that amount every month.\u00a0 One of the disadvantages of signing a reaffirmation agreement is if at any time in the future, you are unable to continue making the promised payments, the lender can repossess your property and still pursue you for any deficiencies even though you had filed for bankruptcy.\u00a0 Bankruptcy does not protect you from any debts relating to post-petition contracts signed, which is what a reaffirmation agreement is.<\/p>\n

An unspoken fourth option is to continue making payments on your property without signing a reaffirmation agreement.\u00a0 You may make prompt monthly payments to your lender and continue to keep your property.\u00a0 If, at any time in the future, your finances suffer and you are unable to continue making payments, you can surrender your property, and the lender would not be able to pursue you for the deficiency since the debt was discharged along with all your other debts in your bankruptcy petition.\u00a0 Although the current law indicates that you need to indicate your intention to either: surrender, redeem, or reaffirm your debt, chances are, if you are making prompt payments on your property, it would not make good business sense for the lender to repossess your property.\u00a0 However, there are certain companies that will repossess your property regardless of whether you are current on your debt if you did not sign a reaffirmation agreement.\u00a0 Thus, there is a risk if you do not sign the reaffirmation agreement that your property may be repossessed.<\/p>\n","protected":false},"excerpt":{"rendered":"

The first option is surrender, is easy, you can surrender your property to your lender and not be liable for any deficiency relating to the surrender of the property in your bankruptcy case. Reaffirming the debt takes some decision making whether it is in your best interests. The third option is, redeeming also takes more work and some decision and extra work too.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[],"_links":{"self":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/53"}],"collection":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/comments?post=53"}],"version-history":[{"count":8,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/53\/revisions"}],"predecessor-version":[{"id":951,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/53\/revisions\/951"}],"wp:attachment":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/media?parent=53"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/categories?post=53"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/tags?post=53"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}