If you are currently considering filing for bankruptcy, it is very important that you are aware of what a reaffirmation agreement is. Reaffirmation agreements are connected with dischargeable debts. When you file for a bankruptcy, chances are that some of the financial responsibilities that you are currently handling will be discharged as a result. These may include some taxes, credit card debts, car payments, and more.
There may be some debts that you could legally discharge in your bankruptcy, but you may not want to. This may sound absurd to a person who is trying to conserve as much money as possible, but some explanation is in order.
If you want to promise to pay a debt in the future even though it is legally dischargeable, this will be arranged in a reaffirmation agreement. Typically, when a debt is discharged it is because the bank will repossess the property that is currently a concern. For example, if you default on your car payments, then you may be able to discharge the debt, but the bank will probably take your car away as a result.
By creating a reaffirmation agreement, you can ensure that you will pay the dent in the future and may be able to keep your car as a result. The same goes for other large properties that may be threatened by a bankruptcy. In order to promise to pay back the debt, you will be required to sign and file a reaffirmation agreement with the court.
These agreements are held to very specific standards and cannot be forced upon a bankruptcy filer. In fact, unless the reaffirmation agreement is entirely voluntary, it cannot be recognized. In addition to the requirement that the agreement be voluntary, it must also be in your best interest as the filer.
For example, if you are considering a reaffirmation agreement that will help you keep a summer home when you have exorbitant amounts of expenses to cover, the court may deem that it is not in your best interests to file the agreement. Instead, the courts will determine that you should relinquish your hold on the summer home in order to get your finances straight and maintain possession of your primary residence. As well, all reaffirmation agreements cannot place too heavy a burden on you and your family.
If the court declares that your reaffirmation agreement to keep your Harley Davidson motorcycle is going to cause your family to suffer, then you are going to have to withhold the filing. As well, the courts maintain that these agreements can be canceled at any time before the court issues your discharge. As well, they can be canceled within 60 days after the agreement is filed with the court.
The courts will look at both of these time frames and permit the cancellation within the one that gives the filer the most time. If you are an individual and are not going to be represented by an attorney at your bankruptcy heading, then the court will need to hold a hearing to determine whether or not your reaffirmation agreement should be granted. It is often a benefit to hire an attorney to help you talk through your options regarding reaffirmation agreements. This way, you can avoid this lengthy and often tension-filled hearing and you will be able to confirm that your plans are sound and wise. Any reaffirmation agreement is not legally binding until approved by the court.
If you reaffirm a debt, but then fail to pay it in the future, then you will owe the same as if there had never been a bankruptcy at all. The debt will not be discharged and the creditor has the right to take any action necessary to recover the property that has a lien or a mortgage. The creditor can also recover a judgment against you for failing to pay the finances that you contractually agreed to. You may even need to re-file for bankruptcy in some circumstances.
If you have more questions about reaffirmation agreements or you want to explore your options within a bankruptcy, then you are going to want assistance from a local bankruptcy attorney. Without a local bankruptcy attorney there to assist you, you may end up making terrible mistakes on your schedules or may even be charged with bankruptcy fraud because of a significant mistake. It is always wisest to play it safe and hire a lawyer who can help you with this legal procedure.