It’s not unusual for people to believe that bankruptcy is a cure-all for debt; file, go through the process and get a clean slate. Not so fast.

Depending on which form of bankruptcy protection you filed for, there are various levels of debt you may be left with when the smoke clears. So, going into it believing you will be debt free is not only inaccurate but likely a poor way to begin your fresh financial start. It’s time to get realistic about your finances. Start with a reality check. For example, you need to deal with any liens that were placed on your property. Bankruptcy alone does not prevent secured creditors from repossessing and selling your personal property.

That’s why you need to discuss having an experienced bankruptcy lawyer draft a reaffirmation agreement so, following bankruptcy filing, you can resume paying old debt in an effort to keep your belongings.  Many people, after much of the unsecured debt has been cleared, will have the income and interest in getting back on track paying for the things that they want to keep – like a house or car, for examples.

How Does It Work?

Once a person files for bankruptcy, they may have the option of signing a contract with a secured creditor to assume existing debt that would have been eliminated by the bankruptcy process, provided they believe they will be able to pay those bills. This helps them to rebuild their credit and hang on to their possessions. Although there are other areas to which the reaffirmation agreement applies, it is mainly used to help people keep their automobiles.

If you fall behind on your car payments, for example, the bank that gave you the loan will likely place a lien on the car, making it eligible for repossession and auction. The reaffirmation agreement allows you to sign a new contract promising to pay the existing debt. The reaffirmation agreement can also prevent a person’s home from going into foreclosure and being sold.

What You Need to Know

All reaffirmation agreements must be approved by the bankruptcy court. The court could deny the agreement if they don’t think the debtor is in a position to successfully pay off the debt. Although these agreements can be helpful, they may not be the right option for you. One big drawback may include potentially higher interest rates, which can once again cause you to fall behind on your payments. Before considering a reaffirmation agreement, it’s critical that you talk to an experienced and knowledgeable bankruptcy attorney.

Take control of your financial future now. If you are facing bankruptcy and are contemplating entering into a reaffirmation agreement, contact the Law Office of Joel R. Spivack now. We can help decide the right course of action and help you move forward.