Reaffirming a debt essentially means acknowledging and taking responsibility for something you owe money on but don't want to lose during the bankruptcy process. For example, a lot of people want to make sure they won't lose their car despite having serious debt. If you're in this situation, what you'll most likely want to do is reaffirm your debt to make sure you can keep the property you don't want to lose.

At my law firm, Jeffrey B. Irby, P.C., we help people in this situation take steps to reaffirm their debt and hold on to their property. We do this by going back to the original contract you had with your creditor (in this case, the creditor who owns your vehicle) and ratifying it. This tells the creditor that:

  • You're filing bankruptcy, but it won't affect them at all.
  • You still agree to all the terms and conditions of that original contract.
  • You're going to keep this piece of property.
  • You're going to keep making payments on the property.
  • You're going to keep your liability (that is, your responsibility) for the property.

Before you reaffirm a debt, it's important to make sure you can afford the piece of property you're trying to keep. Once you reaffirm it, the creditors will have the same rights they had back in state court, which means that if you miss a payment, they can repossess that piece of property. They can take it, sell it, not get much for it, and turn around and say you owe the difference (and they can sue you to make up that difference).

Sometimes it's actually better to give up the piece of property you may originally have wanted to hang on to. For example, if it's a car with high interests rates or unpredictable mechanical problems, it's probably not worth the risk to try and keep it.

In a Chapter 7 bankruptcy setting, giving the property back to the creditor can actually be a big step toward settling your debt because that action tells the creditor, "We're going to call it even, and I don't owe you anything on this property anymore." Chapter 13 bankruptcy works a little differently, but as long as you can stay current on your payments, you shouldn't lose the property.

For more information about effective debt settlement strategies, the best thing you can do is talk to an experienced bankruptcy lawyer. As a Huntsville bankruptcy attorney myself, I offer custom legal guidance to individuals and families throughout northern Alabama. Schedule a free, one-on-one consultation with me to learn more.