Filing for bankruptcy is a difficult decision that few individuals make lightly. Ultimately, the goal is to emerge from bankruptcy with as little debt as possible while protecting assets that would otherwise be subject to a bankruptcy disposition. The federal bankruptcy laws usually require the help of an experienced attorney. Without an attorney, there is a likelihood that a person who files for bankruptcy will remain liable for certain debts that would be eliminated if the bankruptcy is filed correctly.

Take the concept of reaffirmation, for example, which allows choosing to remain liable for certain debts despite the bankruptcy. See 11U.S.C. § 524(c). Usually, bankruptcy eliminates just about any contract that creates a debt obligation, with some exceptions. If the debt is secured by an asset, e.g. car or home, the entity that holds the debt has the power to repossess the asset, but cannot go after the person for the deficiency. For example, if a home had an outstanding mortgage of $100,000, but the home is only worth $80,000, the bank may repossess the home, but cannot sue mortgage holder for the $20,000, unless they reaffirm, that is. By choosing to reaffirm, a person is effectively reviving an obligation that the bankruptcy eliminated. Obviously, lenders would have everyone reaffirm their debt, but experienced bankruptcy attorneys would seldom advise their clients to do so.

Another benefit of not reaffirming is that one may live in the home as long as they make the monthly mortgage payments, and the title stays with the owner. Banks dislike bankruptcies, but they dislike having to pay for maintaining a vacant home even more.

The bad news – yes, there is bad news – is that credit reports will suffer despite the mortgage payments.

The good news is that an experienced Arizona bankruptcy attorney has the ability to create a bankruptcy plan that fits each client’s needs. Contact us today for assistance with your bankruptcy.