Filing for bankruptcy is a way to get a legal fresh start with one’s finances. Reaffirmation is when the debtor agrees to pay off certain debts in full, even if the debt may have been discharged in bankruptcy. While discharging debts may seem like the best option, it can sometimes mean losing assets that may have been used as collateral against debts. If you have assets or property you want to keep through your bankruptcy process, reaffirmation might be beneficial for you.
In a Chapter 13 bankruptcy, debts are reorganized so that the debtor can continue making payments over a set time period. However, in Chapter 7 bankruptcy, the filers debts are discharged. A debtor has four choices in a chapter 7 bankruptcy:
- Return the property to the debtor.
- The asset can be sold and the profits given to the creditor.
- The debtor can pay the current value of the asset to the creditor.
- Reaffirmation. This is when the debtor continues to make payments as if there is no bankruptcy filing.
In the short term, it is easiest to eliminate debt. However, if the asset that the debtor cannot afford is a vehicle or a home, it may be worth it to keep the asset. Reaffirmation allows this, if the debtor can afford payments.
If there are assets you are not willing to part with, consider reaffirmation. It is important to discuss your options, including reaffirmation, with a bankruptcy attorney in Arizona who understands your situation.
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