Reaffirming a Debt in a Bankruptcy Proceeding

Judge holding gavel in courtroom

When you file for protection under Chapter 7 of the bankruptcy law, the court can seize non-exempt assets to sell and pay off your creditors. However, if you have personal property not covered by the exemptions, and you want to protect that property, you can choose to “reaffirm” the debt on that property.

What Is Reaffirmation of a Debt?

In its simplest terms, a reaffirmation of a debt is an acknowledgement that you owe the money and intend to continue making payments. It’s not clear, however, whether the bankruptcy court needs to approve the reaffirmation or whether you simply need to notify the creditor and apply for reaffirmation. Some courts have allowed a debtor to reaffirm simply by telling the bankruptcy court that you plan to do so.

It’s important to understand, though, that you must affirmatively indicate an intention to reaffirm the debt. This is a change for prior bankruptcy law, where you could stay current on an obligation and avoid repossession. Under the law as it currently exists, if you’ve filed a bankruptcy petition, but have not proposed to reaffirm the debt, a lender can seek to take back secured property.

To warrant approval, the reaffirmation cannot be found to impose an undue hardship on you as a debtor. You must be able to demonstrate that you will have the resources to make payments, or that someone else will make them for you. Your attorney can typically sign off on a reaffirmation, but the court will also set up a hearing to rule on a reaffirmation, if necessary.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.

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