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5/28/2021 5 Things You Should Know About A Reaffirmation Agreement in Chapter 7 Bankruptcy in AlabamaRead Now5 Things You Should Know About A Reaffirmation Agreement in Chapter 7 Bankruptcy in AlabamaA reaffirmation agreement is an agreement in which the debtor (the person who owes money and is filing the bankruptcy) agrees to continue repaying an existing debt despite having filed a Chapter 7 Bankruptcy. Reaffirmation of a debt normally involves a secured debt which is a debt that is secured by collateral, usually a house (mortgage), auto loan, or other loan secured by creditor.
With regards to secured debts in a Chapter 7 Bankruptcy most debtors have two (2) options -- one is to surrender the collateral and completely wipeout (discharge) the debt. The second option is to keep the collateral and continue paying on that debt normally under the same terms as in the original contract. Most secured creditors request and/or require that in order for the debtor to keep the collateral and continue paying that debt, that the debtor sign a reaffirmation agreement and reaffirm that prior contract. Here are five (5) things you should know before reaffirming a debt. 1. Reaffirming A Debt Can Help You Rebuild Your Credit Some bankruptcy filers may think "I have just filed for bankruptcy. Why would I want to reaffirm a debt I could get rid of." This could be true in some circumstances; however, in other situations, signing a reaffirmation agreement may be beneficial. When a debtor reaffirms their debt, they are agreeing to make the same monthly payments on the contract as before bankruptcy. This will help rebuild their credit score with the credit reporting agencies over time and show lenders that this person is responsible enough to handle additional loans or credit cards. If a person continues to make on-time payments after their Chapter 7 bankruptcy is completed (discharged), a person's credit score can increase quickly and substantially. Some people can have a credit score in the 700's with the credit reporting agencies shortly after a year in bankruptcy if they have worked on it. However, this should not be the sole reason to reaffirm the debt. You should only reaffirm the debt if you need the collateral and are sure you can afford the monthly payments. Click here for a Free Consultation, no obligation and no pressure. Your consultation can be in person if you are near Cullman County, Alabama or by telephone if you prefer or are located elsewhere in Alabama. Find out whether Chapter 7 bankruptcy or a Chapter 13 bankruptcy is right for your situation. 2. Reaffirmation Can Provide Certainty Against Repossession of a Vehicle and Foreclosure of a House Some creditors will allow debtors in a Chapter 7 bankruptcy to maintain possession of the collateral (normally a vehicle or real estate / house) by just continuing to make regular on time monthly payments. This is often called "Stay and Pay". It is normally easier to "Stay and Pay" with a mortgage (i.e. a loan secured by a house and real estate). This is due to the laws governing foreclosure. If you are current on the mortgage payments, it is difficult for the mortgage company to meet the requirements to foreclose on the house, even if you did not reaffirm the debt. However, some creditors require entering into a reaffirmation for the debt in order for debtor to keep the collateral. Most car loan companies do require reaffirmation agreements and will threaten to repossess the vehicle collateral if reaffirmation agreements are not signed. Click here for a Free Consultation, no obligation and no pressure. Your consultation can be in person if you are near Cullman County, Alabama or by telephone if you prefer or are located elsewhere in Alabama. Find out whether Chapter 7 bankruptcy or a Chapter 13 bankruptcy is right for your situation. 3. Reaffirmation Agreements Put You Back On the Hook An individual normally files a bankruptcy case to get debt relief. If you reaffirm a debt you will not get debt relief from that debt. Once you enter the agreement you are once again have personal liability for that debt. If you default on a debt after reaffirmation, you are subject to the same negative consequences as if you had not filed a bankruptcy case. Your collateral can be repossessed or foreclosed upon. You can be subject to a lawsuit and therefore liens and garnishments for any deficiency owed after the collateral is sold. Defaulting after reaffirmation can be doubly complicated because at that point you have already used up your Chapter 7 Bankruptcy protection and cannot file another Chapter 7 for 8 years. So, you will not be able to discharge the deficiency balance. You may, however, be able to make the debt manageable through the use of a Chapter 13 Bankruptcy. Click here for a Free Consultation, no obligation and no pressure. Your consultation can be in person if you are near Cullman County, Alabama or by telephone if you prefer or are located elsewhere in Alabama. Find out whether Chapter 7 bankruptcy or a Chapter 13 bankruptcy is right for your situation. 4. A Reaffirmation Agreement Can Be Rescinded If Done Prior to Discharge or Within 60 Days of the Reaffirmation. The bankruptcy laws state that a person may rescind a reaffirmation agreement at any time before the bankruptcy court enters a discharge order or before the expiration of the sixty-day period that begins on the date the reaffirmation agreement is filed with the court, whichever occurs later. To rescind a reaffirmation agreement, a person must file notice of rescission with the court and notify the creditor that the reaffirmation agreement is rescinded. As long as it is done within the time frame set out above, you can rescind your reaffirmation of the debt for any reason or no reason. You If you do change your mind and want to rescind the reaffirmation agreement, you will need to give the appropriate notice to the creditor and file the notice with the court. We, as your Cullman Bankruptcy Attorney, will do this for you. Click here for a Free Consultation, no obligation and no pressure. Your consultation can be in person if you are near Cullman County, Alabama or by telephone if you prefer or are located elsewhere in Alabama. Find out whether Chapter 7 bankruptcy or a Chapter 13 bankruptcy is right for your situation. 5. The Requirements Secured Creditors Have for Reaffirmation If you want to sign a reaffirmation agreement and keep the property you have as collateral, the creditor normally requires two (2) things: 1. You must be current on your payments when you file your bankruptcy case. Creditors will require you to be current on your payments or at least very close to current. It is a waste of the creditor's time to reaffirm a debt with you only to have to repossess or foreclose on it shortly thereafter. This also protects you as the debtor. If you want to keep the property you need to have the means to pay for it. If you are in substantial arrears it is probably a sign that you cannot afford to keep the property and, as set out above, you do not default after reaffirmation. There are severe consequences. 2. You must have proper insurance on the property. Creditors will require you to have the collateral properly insured before they allow you to sign a reaffirmation agreement. This is already part of your original contract with the car lender or mortgage company. Not having insurance is a form of default on the contract just like not making your monthly payment. Insurance also protects the creditor from losing its collateral to some type of catastrophic damage. For vehicles you must have full coverage insurance on the car or truck or other vehicle. For vehicles and houses you must have coverage in an amount high enough to cover the value of the property, and the lienholder and/or mortgage company must be named as a loss payee on the insurance policy. Click here for a Free Consultation, no obligation and no pressure. Your consultation can be in person if you are near Cullman County, Alabama or by telephone if you prefer or are located elsewhere in Alabama. Find out whether Chapter 7 bankruptcy or a Chapter 13 bankruptcy is right for your situation.
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Below I am linking an article by Amy Fontinelle with a good summary of what debt collectors are not supposed to be doing. If you are having these issues with a debt collector, you may have a Fair Debt Collection Practices Act violation case. You may also need to look into filing bankruptcy. Contact an attorney immediately. These types of cases can have short time limits on when you can file a case.
We offer free consultations for both FDCPA cases and bankruptcies. You have nothing to lose. Call (256)739-1962 or click here to contact us electronically. . . . . 5 Things Debt Collectors Are Forbidden To Do By Amy Fontinelle | Updated December 18, 2014 Debt collectors have a reputation – in some cases, a well-deserved one – for being obnoxious, rude and even scary when trying to get borrowers to pay up. The federal Fair Debt Collection Practices Act (FDCPA) is supposed to curb these annoying and abusive behaviors, but some debt collectors flout the law. Here’s what you should know about what debt collectors are forbidden from doing so you can stand up for yourself with confidence. Read more: 5 Things Debt Collectors Are Forbidden To Do Investopedia - http://www.investopedia.com/articles/personal-finance/121614/5-things-debt-collectors-are-forbidden-do.asp#ixzz40FYiQ0ja 3/5/2020 I have been using a Payday Loan company or Check Cashing store and can no longer pay the fee and I know the check(s) will bounce. Can I file bankruptcy on payday loans or check cashing loans? Can I be charged with a crime or go to jail?Read NowI continue to see more and more clients come in to see me about filing a Chapter 7 or Chapter 13 bankruptcy after being caught up in the payday loan or check cashing trap. It’s an easy lure – quick easy money with no credit check. It is easy for consumers to rationalize that they can pay the money back out of their next paycheck and be caught up. However, far too often the next paycheck is “already spent” as well and you have to “renew” the loan and pay the fee.
The cycle of renewing these loans becomes extremely draining on a person’s finances which were assumedly already teetering on the edge. All it takes is one look at the interest rate on these types of loans to see why. The average “fees” paid on these loans amount to normally between 400% to 720% annual interest rate. The cycle also often leads to obtaining these loans at multiple companies in an effort to “borrow from Peter to pay Paul.” The FTC has issued a Consumer Alert regarding these loans Payday Loans Equal Very Costly Cash. You can file bankruptcy in Alabama on payday and check cashing loans and these loans are dischargeable. Do not let these companies convince you otherwise. I have had clients who have been told “You cannot file bankruptcy because you signed a form saying you wouldn’t.” This is NOT true (wouldn’t every lender do this if it was). In addition I have had clients who have been told they would be charged with a crime for writing a bad check. This again is NOT true. The crime of writing a bad check is a form of fraud, i.e. saying you have enough money in the bank to cover the check at the time of writing it. This fraud has to be relied on by the person receiving the check. In the payday and check cashing loan situation, these companies know the check is not good at the time they accept it; therefore, there is no fraud and there is no crime. Do not let these predatory loans continue to financially and mentally drain you. Obtaining these types of loans is often a sign of other debt problems as well. Make an appointment with an experienced and knowledgeable bankruptcy attorney and see about obtaining a fresh start. Filing for bankruptcy is a heart wrenching decision. On the one hand you want to do what you promised your creditors you would do, but on the other hand you have to house, feed, and clothe your family and yourself. There is no question that bankruptcy should be the last resort, but as to whether you should file or not, my classic lawyer answer is “It depends.”
First, we need to look at why you are considering filing bankruptcy. The most common reasons are the following:
If your answer to any of these questions is “Yes”, then it may be a good time to see an Alabama bankruptcy attorney. This does not necessarily mean you should file bankruptcy, but it does mean you may need some legal advice. The attorney may suggest some of the following alternatives to bankruptcy:
If any of these alternatives allow the possibility of a LONG TERM solution, then they should be greatly considered even though it may call for tough decisions and hard work. Why? Although bankruptcy can be a “quick fix”, it comes with some serious long term consequences to your financial future. The bottom line is I and many other Alabama bankruptcy attorneys offer free initial consultations, so it will not cost you anything to see what your options are. If after talking to an attorney, you think you can dig yourself out of the hole you are in without bankruptcy then definitely try that. But, if it does not work out you will be prepared and should have a plan. If you have further questions regarding this or other Alabama bankruptcy, debt, or budgeting questions please email me. |
AuthorI am an attorney located in Cullman, AL. I practice extensively in the area of consumer bankruptcy law, that is, I file Chapter 7 and Chapter 13 bankruptcies for individuals. I handle cases all over North Alabama and have helped hundreds of clients through the bankruptcy process., I receive many referrals from former clients and their families and other attorneys. Why? Unlike other firms, I have a local office. If you are from out of town, we have the technology available to keep your traveling to a minimum. Also, unlike many firms, you will meet personally with an attorney, not a paralegal. An attorney will handle your case from start to finish. , Archives
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