How To Keep Collateral When Filing For Bankruptcy
A common misconception about filing for bankruptcy is that you can eliminate your debt while keeping your assets. This is simply not the way bankruptcy works. The benefit of bankruptcy is to eliminate burdensome debt and give the debtor a fresh financial start. This may require that you return some of your assets to the lender, so that you no longer have to make a monthly payment. However, for many people this is not the case. Wiping out unsecured debt such as credit card obligations frees up enough income to continue making payment on secured debts such as cars and homes.
The way to keep these types of assets is by negotiating a reaffirmation agreement. A reaffirmation agreement is like a new contract for the debt, and is reduced to a writing that sets forth repayment terms. The agreement is financially binding and will remain so even after the bankruptcy case is complete. Common reasons for deciding to reaffirm a debt include:
● Negotiation of a lower interest rate, which will reduce the monthly payment amount while allowing the consumer to keep valuable assets such as the family residence.
● Rebuilding credit.
● Maintaining a good relationship with the lender, which may prove helpful in the future if new loans are sought.
● Keeping the ability to communicate with the lender, which can be a huge benefit if you fall on hard financial times again and need to negotiate a late payment or seek a loan modification or refinance.
It is important to remember that when you reaffirm a debt you remain financially responsible for the payments. This means if you fail to make the payments, you can still be sued for the debt and even for repossession or foreclosure. Making the decision to reaffirm should only be made after thoughtful analysis. We can help you review your circumstances and determine which debts are right for you to reaffirm, and what pieces of property you can live without and return to the lender.
If you have questions about what assets you can keep in a bankruptcy, call our office for help. Call a Plantation, Florida debt relief attorney today for more information.