Should You Reaffirm Your Debts In Bankruptcy?

When you declare bankruptcy protection, the court will discharge some of your debts.  If it is a chapter 7 bankruptcy filing, it may sell some of your assets in order to settle as many of your debts as possible.  The court will not sell any of your assets until after it thoroughly assesses your budget and sees which assets you truly need to keep; therefore, it is rare for a bankruptcy court to liquidate a debtor’s house, although it may sell real estate properties the debtor owns which are not the debtor’s primary residence.  Letting the court sort through your possessions and decide which ones to keep is not the only option, nor is rebuilding your credit from zero after a chapter 7 bankruptcy filing.  Some people choose to sell non-essential assets (such as boats, vacation homes, and valuable jewelry) in order to avoid having to file for bankruptcy, and others even choose to go back to making payments on debts that the bankruptcy court has already discharged.  A Miami chapter 7 bankruptcy lawyer can go over all your options with you, including reaffirmation of debts after a chapter 7 bankruptcy filing.

Why Would You Assume Responsibility for a Debt That the Bankruptcy Court Has Already Discharged?

Credit card debt is the worst kind of bad debt, right?  Why, then, would someone choose to get back on the hook for their credit card debt after a bankruptcy court discharged it?  Some people do exactly that, by signing a reaffirmation of debt agreement after their bankruptcy case finishes.

The reasons for reaffirming a debt that you previously discharged in bankruptcy usually have to do with rebuilding your credit.  When you are trying to build your creditworthiness after a bankruptcy filing, you usually have to start small, perhaps even as small as a secured credit card with a $200 limit.  The amounts you can borrow are low, and the interest rates and fees are high.  If you choose to reaffirm a debt, such as a credit card account or a line of credit, you get to keep the same terms of the loan that you had before you filed for bankruptcy.  This is good for the lender, because if you reaffirm the debt and continue to make payments on it, the lender will likely get more money than they got when the bankruptcy court discharged the debt.

Once you sign an agreement with the lender to reaffirm a debt, though, the decision is permanent.  If you file for bankruptcy again in the future, you will not be able to discharge the debt that you reaffirmed after your first bankruptcy filing.  Therefore, it is best to discuss matters with a lawyer before you file for bankruptcy or reaffirm your debts afterward.

Contact a South Florida Bankruptcy Lawyer About Reaffirmation of Debts

A chapter 7 bankruptcy lawyer can help you file for bankruptcy protection and can help you decide which of your debts, if any, to reaffirm afterward.  Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.