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What You Should Know about Debt Reaffirmation

When declaring bankruptcy, reaffirming debts can prevent discharge of debts.

There are certain decisions you’ll need to make during your Chapter 7 bankruptcy case that can have a big impact on your financial future after your case has concluded. One of these decisions is whether or not to reaffirm certain debts. Learn more about debt reaffirmation and the pros and cons of reaffirming debts below, and speak with an Illinois bankruptcy attorney with any additional questions.

Reaffirming a debt: what does it mean?

Chapter 7 bankruptcy petitioners have the option of reaffirming debts, which excludes them from the debts that are eliminated in the bankruptcy process, requiring debtors to continue making payments on those debts. The most common reason that petitioners will choose to reaffirm a debt is when they want to retain the property that serves as collateral on the debt. If, for example, you make monthly payments on a car loan, you’d need to reaffirm that debt if you filed for bankruptcy and wished to retain your car.

When can a debt be reaffirmed?

Creditors are usually all too happy to allow bankruptcy petitioners to reaffirm their debts, as it means they’ll continue to collect revenue from that debtor and will be saved from the hassle of selling repossessed collateral. That said, debtors either have to be current on their payments on the debt in question, or be able to become current on those payments in the near future. In some cases, a creditor may be willing to negotiate a reduction in the payment arrears when you agree to reaffirm a debt, or they may be willing to shift the missed payments to the end of the loan period. The lender may even be willing to forgive the unpaid payments altogether. Your bankruptcy attorney may be able to negotiate with your creditor on your behalf to find an arrangement that works best for you.

Is reaffirming your debt a good idea?

Whether or not reaffirmation is wise depends on your individual circumstances. If you’re considering reaffirming a debt for property you can’t afford to keep, then reaffirmation might not be the right choice. Reaffirming these types of debts could result in you being behind and struggling to make ends meet again shortly after your bankruptcy is completed. If, however, the debt you want to reaffirm is one you’ll be able to afford to pay, then debt reaffirmation could provide a boost to your credit score post-bankruptcy. Your Cook County bankruptcy attorney can help you decide whether reaffirming a debt is the right choice for you.

If you’re struggling with making ends meet in Illinois and need help getting out from under crushing debt, contact the knowledgeable and effective Chicago area bankruptcy attorneys at Johnson, Westra, Broecker, Whittaker and Newitt at 630-665-9600.

Johnson Westra Broker Whittaker & Newitt, P.C.

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