Getting rid of debt through a chapter 7 bankruptcy is certainly a very good thing. However, you may also want to hold on to certain pieces of property and debts connected to them—like your vehicle. Making a move known as a reaffirmation can help some filers do just that. To find out the details of how reaffirmations work, read below.
Debt and Repossessions
It's easy to fall behind on bills once they begin to accumulate. Most of those thinking about filing for bankruptcy is adept at juggling debts to keep the important ones paid while letting others go. Unfortunately, that's a good way to get behind on even important debts like your auto loan. If you are being threatened with repossession, filing for chapter 7 relief is an excellent way to put a stop to those sorts of actions. All of your bill collectors have to obey the bankruptcy court's automatic stay and stop punitive debt collection practices like repossession. The benefit of the bankruptcy filing is that it gives filers a chance to take a deep breath and re-think their budget priorities. In doing so, a bit of information about the two main types of debts may be in order.
Secured and Unsecured Debts
Secured debts are attached to certain items of property. Commonly, that covers mortgages (attached to the home) and auto loans (attached to the vehicle). On the other hand, unsecured debts apply to credit cards, personal loans, payday loans, medical debts, and more. None of those aspects are attached to any property. That means non-payment, once you declare bankruptcy, brings no loss of property. Take a look at your budget once you have filed bankruptcy and notice how much more money is available once you remove all unsecured debts. Then, decide whether or not you want to keep secured property like your home and car. To keep them, you must make arrangements to catch up on the past-due payments.
Speak to Your Bankruptcy Lawyer
Don't pay any bills, however, without speaking to your lawyer. They can advise you on when and how to get caught up on your home or vehicle payments. In many cases, they will advise you to reaffirm your auto loan. That means you are promising to pay it even though you are declaring bankruptcy. It's like a renewal of the original promise to pay the loan. Reaffirmations are usually performed at the creditor's meeting or before it but you need to let your lawyer know that you want to keep the vehicle and that you want to reaffirm the loan. Speak to your bankruptcy lawyer to find out more about loan reaffirmations.Share