Chapter 7 bankruptcy requires that debtors give up property of value – if they have any – to be sold by the trustee to pay off creditors. In real life, there rarely is a “seizure” of the debtor’s assets because most debtors don’t have any property of value.
However, there is a way to hold onto property that has some value – but not too much — or to keep property, such as a car or computer, that you need or want to keep and are still making monthly payments. The rules of a Chapter 7 bankruptcy allow debtors to reaffirm debts. A Baltimore bankruptcy attorney can provide more details.
A reaffirmation agreement between the debtor and a creditor works by waiving the discharge of a particular debt that would otherwise be discharged in the pending Chapter 7 bankruptcy. This means the debtor will be contractually obligated to the creditor and personally liable for the debt even after the bankruptcy case is closed.
Reaffirming a debt means that, with the lender’s permission, the debtor is setting that debt aside from the bankruptcy process and continuing to make payments as agreed. This allows the debtor, in the example of a car or a computer, to maintain ownership of the property.
Some lenders are willing to agree to reaffirm a debt because it means the consumer will be in a better position to make payments once the other debts are discharged.
It’s common to reaffirm an auto loan because this works for both the debtor and the lender. The debtor gets to keep the car and the lender avoids having to repossess and sell the car for what is likely to be less money than what is owned on the automobile loan.
Of course, if you don’t continue to make the payments after the reaffirmation, then the lender has the right to repossess the car and can sue you if there is a deficiency. A deficiency means that there is a negative balance when the selling price is subtracted from the amount that is still owed on the vehicle.
In another example, many debtors want to keep their computer but they still owe on it and are making monthly payments. In a Chapter 7 bankruptcy, a debtor can reaffirm the debt on the computer.
Also, Chapter 7 bankruptcy debtors can choose to reaffirm a credit card if they want to keep the card which means they agree to continue to make the required monthly payments. However, potential Chapter 7 debtors should be aware that some lenders automatically terminate credit card privileges if they found out that a consumer has declared bankruptcy. An Ocean City bankruptcy attorney can provide more details.
So, reaffirmation might be the best way to keep some types of property, such as computers or automobiles or a favorite credit card.
Reaffirming a debt is voluntary. Creditors can ask you to reaffirm a debt but you are not required to agree.
To reaffirm a debt, the debtor fills out a reaffirmation agreement and files it along with their bankruptcy paperwork. The form is simple and generally no more than one page long.
The Law Office of Thomas J. Maronick is open during the pandemic and will continue to meet your Annapolis, Baltimore, Essex, Ocean City, Towson, White Marsh bankruptcy needs. A Baltimore bankruptcy attorney can help you to determine the best way to get out of debt and out from under creditor calls. An Ocean City bankruptcy attorney can devise a strategy for you that allows you to use the bankruptcy laws to your advantage. The consultation is free.
We can meet with you remotely if you have access to Zoom. You can contact Thomas Maronick on his cellphone at 202.288.0167, the law office at 410.885.1775 or through the website for a free consultation.