Tuesday, October 27, 2015

Will I lose my house in bankruptcy? What about my car? Reaffirmations in Bankruptcy

Many people are afraid to seek bankruptcy relief because they do not want to lose their house or their car.   Often people will want to list their credit card debts in their Petition but not their mortgages or car notes, fearing that if the bank finds out, they will lose their home and car.   Generally, you do not need to fear losing your house and car if you continue to pay these debts after the bankruptcy.

You have a choice when you file bankruptcy to "reaffirm" a debt, which means that you  promise to pay the debt regardless of your bankruptcy filing.  In essence, you make a choice to not obtain a "discharge" from certain debts.   After you file bankruptcy, your bankruptcy attorney may contact your creditor and file out forms to reaffirm a debt.  In my opinion, it is a good idea to do this when there is little money owed, a bad idea if there is a great deal of money owed.

For example, if I own a 2009 Toyota and only owe $3,000.00 on this car, a reaffirmation may be a great idea. A reaffirmation agreement must be approved by the bankruptcy court and show that you can afford the debt.  A reaffirmation agreements helps you re-establish credit after your bankruptcy, however, if you owed a great deal of money on the car, I would not recommend it.  The point of bankruptcy is to get a fresh start, and being stuck is old debt doesn't help.

 Most lenders to do not insist on a reaffirmation agreement, and you can continue make payments on your house and car.  If you do not reaffirm, usually you will not be able to pay online and you will not get credit for good payments nor dinged for late payments.  The good news is that if the car blows a motor, you can stop paying on the car and let the creditor take it back.  I never recommend reaffirming a mortgage, as you never know what might happen in the future.  If you reaffirm a large debt and fail to make payments you can be stuck with the debt, unable to file bankruptcy again for 8 years.

Here is information from the Bankruptcy Court in Newnan Georgia regarding reaffirmation agreements.

Please visit my website at tomtierneylaw.com

Please call if you need legal representation to Thomas F. Tierney at (770) 631-1100 or e-mail at tierneylawyer@yahoo.com   Thomas F. Tierney is an attorney who represents clients in south metro Atlanta, including Fayette County, Coweta County, Peachtree City, Tyrone, Fayetteville, and Newnan Georgia.

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