Wilmette bankruptcy lawyer discusses some issues with reaffirmation agreements. For example, if the debtor was not able to get a loan modification but the reaffirmation agreement is effectively a loan modification, then it would make sense for the debtor to sign that reaffirmation agreement.
The attorney for the debtor must caution the debtor however that by signing a reaffirmation agreement, they were our re-upping the dead and the agreement will allow the lender to pursue the debtor should the debtor failed to make timely payments going forward. You are basically putting yourself back on the hook for a particular debt that you had no legal obligation to pay for at that point. You as the debtor had the ability to give up the vehicle or give up the item of personal property or in the case of a mortgage on real estate; you had the ability just to make voluntary payments to the lender. You did not have to reaffirm and put yourself back on the hook. If you file bankruptcy yourself, you will be at a big disadvantage in negotiating reaffirmation agreements.
Reaffirming a debt is a good way to reestablish credit going forward after bankruptcy. The finance company that you reaffirmed the debt with will report that debt to the credit bureaus as being in good standing and they will record your payments as being timely provided they are made timely. This will help improve your credit score in the future because it’s a line of credit that is going to be reported positively to the credit bureaus. If you can add one or two separate credit lines in addition to the reaffirmed that, you are going to be well on your way to seeing your credit score improve over the next six months to two years. You will find that there is a good life after a bankruptcy claim.
The consumer protection element of the new bankruptcy law was to make sure that individuals are not reaffirming debts that they cannot afford. That is why the court will review all reaffirmation agreements, especially those that are showing a presumption of an undue hardship. The court will then look to see whether or not the income and the expenses justify the debtor’s ability to make that payment without hardship. If the court is not satisfied with what he or she sees on paper, the judge can then set a hearing before the bankruptcy court where the debtor will have to come in and explain to the court how he can make those payments under the purported reaffirmation agreement. At your court appearance, you will be assisted by your bankruptcy lawyer.