If you feel overwhelmed with medical debt, credit card expenses or mortgage payments, you are not alone. More than 434,500 Americans filed for bankruptcy in 2021, with 310,597 of those being Chapter 7, according to United States Courts.
Chapter 7 bankruptcy offers relief from financial stress through discharge of your debt. Do you lose all of your property during a liquidation bankruptcy case? There are ways you can reauthorize loans and keep your property even after discharging the previous debt.
What is debt reaffirmation?
If you wish to retain property after a bankruptcy, you may reaffirm the debt through the lender. Debt reaffirmation is a contract made between you and the lender agreeing that you will remain liable for the amount owed on the property, such as a car or home, according to the United States Bankruptcy Court.
Not only does this allow you to keep the property, but the lender does not have to repossess or foreclose on the property. In some cases, the lender will help make payments more affordable by lowering the interest rate or decreasing monthly payments.
What should you consider?
There are several items to consider when deciding whether debt reaffirmation is right for you, such as:
- Can you replace the property for less money?
- Is the property a want or a need?
- Will you need to get caught up on missed payments?
- How long is the life of the loan?
- Did the lender offer new and improved terms?
It is important to only reaffirm a debt if you can continue making payments on the loan. You do not want to get caught in a situation where you still struggle to make payments after discharging the bankruptcy.
While debt reaffirmation can help you retain property and rebuild your credit after a bankruptcy, it is important to ensure the move is right for your financial situation.
