Fremont Bankruptcy Attorney Talks about Reaffirmations
Fremont Bankruptcy Attorney Talks about Reaffirmations
There is a common misconception in bankruptcy. Many people believe that if they file bankruptcy, they will have to lose all their assets including cars. Of course, without a car, the debtors (as they are called by the Bankruptcy court) will probably lose their jobs and fall into the more debt. This problem has been well anticipated by the lawmakers, the Bankruptcy Court, and even the creditors. For more information on bankruptcy FAQ's and understanding your bankruptcy rights, please visit Sagaria Law.
The lawmakers created a procedure called “reaffirmation” of debts or an order by the Bankruptcy court stating that a certain debt will survive the bankruptcy and remain in effect. A common reaffirmation is where the Bankruptcy court reaffirms a car debt so that the debtors can keep a car by continuing payment on it.
In order to get such a reaffirmation, the debtor and creditor both must sign a contract stating that the exact terms of the reaffirmation including total amount reaffirmed, monthly payments, and interest rate. The Bankruptcy court is very worried about debtors getting in over their heads again so the agreement has at least three areas for the debtors to sign that they want this reaffirmation.
Furthermore, the Bankruptcy court requires the debtor to state if the monthly payments will be a “hardship” or not. A hardship is found if the debtors living expenses will exceed their income before they account for the new monthly payments. The debtors have to give a statement as to how they will pay the additional monthly amount if they have such a hardship. This is not an easy thing to prove and the Bankruptcy court is likely to deny a reaffirmation if the debtors cannot give a good explanation how they will overcome the reaffirmation.
Fortunately for the debtors, creditors really want reaffirmations of debts and may be very accommodating in order to get one. For example, a creditor which had previously refused to alter the terms of a car loan may decide to lower the loan amount, the interest rate, and/or monthly payments in a bankruptcy because they want to encourage the debtor and Bankruptcy court to accept. The reason for the sudden willingness to accommodate is because the creditor’s other choice is to take a car in an unknown condition that they will have to sell. The creditors would rather get the debtor’s money. If the creditor asks for too much money, then the Bankruptcy Court will deny the reaffirmation. Therefore a reaffirmation can be a silver lining in a bankruptcy for the debtor.
If you have questions about asset protection please contact Sagaria Law for an experienced bankruptcy attorney to answer your questions. If you are considering bankruptcy or reaffirming a debt, please consider scheduling a free consultation with Sagaria Law 1-800-941-6730.
