REAFIRMATION OF DEBTS AND LEASE ASSUMPTIONS 

 

What is Reaffirmation or Assumption of a Debt?

Although you filed bankruptcy to cancel your debts, you may have the option to sign a written agreement to “reaffirm” or “assume a debt. If you choose to reaffirm and the creditor agrees, by doing so, you are agreeing to be legally obligated to pay the debt despite bankruptcy. If you reaffirm, the debt is not discharged or canceled by bankruptcy. If you fall behind on a reaffirmed debt, the creditor can seek all state law remedies available such as making collection calls, suing you, and if a judgment is entered against you, your pay or tax refund garnished or the creditor may take other property. Reaffirming a debt is a serious matter. You should never agree to a reaffirmation without a very good reason.

 

Do I Have To Reaffirm or Assume Any Debts?

No. Reaffirmation and assumption of agreements are always optional. Neither you nor the creditor are obligated to enter into this type of agreement.  To reaffirm or assume an agreement is not required by bankruptcy law or any other law. If a creditor tries to pressure you to reaffirm or assume a debt, remember you can always say no.  In addition, in some cases, even if you do reaffirm or assume a debt, you may be able to revoke the agreement, provided it is done timely and properly.

 

Can I Change my Mind After I Reaffirm or Assume a Debt?

Yes. You can cancel any reaffirmation agreement for 60 days after it is filed with the court or anytime prior to discharge, whichever occurs last.  To cancel a reaffirmation agreement, you must notify the creditor in  writing. You do not have to give a reason. Once you have canceled, the creditor must return any payments you  made on the agreement. Also, remember that a reaffirmation agreement has  to be in writing, has to be signed by your lawyer or  approved by the judge, and has to be made before your discharge order is entered. 

 

Do I Have to Reaffirm or Assume on the Same Terms?

No. A reaffirmation is a new contract between you and the lender. You should try to get the creditor to agree to better terms such as a lower monthly payment or interest rate. You can also try to negotiate a reduction in the amount you owe. The lender may refuse but it is always worth a try. The lender must give you disclosures on the reaffirmation agreement about the original credit terms, and any new terms you and the lender agree on must also be listed.

 

Should I Reaffirm or Assume a Debt?

If you are thinking about reaffirming, the first question should always be whether you can afford the monthly payments. Reaffirming any debt means that you are agreeing to make the payments every month, and to face the consequences if you don’t. The reaffirmation agreement must include information about your income and expenses and your signed statement that you can afford the payments. If you have any doubts whether you can afford the payments, do not reaffirm. Caution is always a good idea when you are giving up your right to have a debt canceled. Before reaffirming, always consider your other options. For example, instead of reaffirming a car loan you can’t afford, can you get by with a less costly used car for a while?  Remember, you are filing bankruptcy to get a fresh start, you should always consider whether reafirming or assuming the debt will interfere or impede your fresh start.  Don't agree to keep the debt if you cannot afford to pay it.  You will likely be sued if you can't and may wind up in the same situation you were trying to avoid.  Think carefully before you reaffirm or assume a debt.  Listen to your attorney.  He or she will have an objective perspective of whether you can afford the payment.

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