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Benefits and disadvantages of reaffirming a debt in bankruptcy

When you have decided that Chapter 7 bankruptcy is the best way for you to overcome your current financial challenges, there may be some personal property, such as a vehicle, that you would like to keep. We at the Law Office of Kim Covington understand that repossession of your transportation can create hardship in cases like these. According to the District of Oregon Bankruptcy Court, a reaffirmation agreement may be the solution that allows you to continue paying the debt on that item while other debts are discharged.

A reaffirmation agreement is a voluntary agreement that you make with the court and one of your creditors to continue making payments on that particular debt and retain the property. If you are able to reaffirm the debt on a vehicle, you can keep it and continue to make the payments on it without worrying about it being repossessed. A judge will determine whether the reaffirmation of your debt is in your best interests. However, if you do file to keep a portion of your debt, the judge will consider that when determining whether the rest of your debts pose an undue hardship, and it could affect the ruling on your bankruptcy.

If you fall behind on the payments of the reaffirmed debt, your property is still subject to repossession. The creditor may sell it and hold you accountable for the balance, so it is crucial to determine whether you are able to make the payments before you file the reaffirmation agreement. If you change your mind, the court will allow you to withdraw the agreement within 60 days of its filing, or the discharge, if that is the later date. It is your responsibility to contact and inform the creditor that you have cancelled the agreement. If you would like to learn more about vehicle loans and repossession, please visit our website.

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