New Jersey Bankruptcy Law Office

TO REAFFIRM OR NOT?  THAT IS THE QUESTION…..

What is reaffirmation?

Reaffirmation is an  agreement that signifies to a secured lender, the holder of a collateralized obligation,  typically a mortgage, car loan or lease that you will continue to abide by the terms of your  original  contract.  The effect of reaffirmation is to create a contractual obligation that would otherwise have been discharged in your bankruptcy filing. You are agreeing to continue to make your payments,  despite your right to discharge the underlying debt in bankruptcy.  Secured lenders want to know what your intentions are concerning these secured assets so that they may proceed  accordingly.   If you are current pre-bankruptcy on these obligations and remain current during and after the bankruptcy,  these items will be reported positively on your credit bureau and can be very important credit rehabilitators.

Reaffirmation is not always a possibility. Nor is it always the right choice.

Where reaffirmation is not possible:

One can remain current on their mortgage and or car payments and not be able to reaffirm in a situation where they do not have sufficient  documented income  to show that they have the ability to make these payments after considering all of their monthly expenses.  In such cases you can still keep the collateral  but the items may not be reported correctly on your credit report as current.  Rather they may be designated a ”included in bankruptcy”  despite the fact that anyone reading your credit report could see that the payments have remained current.  This can be problematic as you try to  refinance or get a new car lease  after the bankruptcy.  If the underwriter considering your application makes an  informed analysis they will realize that you  remained current irrespective of the  way the item is reported on your credit.   The problem is that most underwriters do not properly analyze the situation. 

Where reaffirmation may not be the right option:

In other instances you may not be sure that  you want to keep the house or vehicle.   May be you are unsure of your future income or were just a co signor for someone else,  in which case it does not make sense to reaffirm the obligation and may make more sense to consider a voluntary surrender of  the vehicle or in the case of the house loss mitigation,  a court approved sale or  a voluntary surrender.

DISCLOSURE*****  This information and any information  contained on this website is not intended to create an attorney client relationship or to provide legal advice.