In recent years, many Georgia residents and people throughout the country have encountered serious financial problems. Many businesses have gone under, and millions of people have dealt with unexpected medical bills due to health crises. Thankfully, valuable financial tools like Chapter 7 bankruptcy exist to help get things back on track. If you’re considering or have recently filed a petition, and a creditor has asked you to sign a debt reaffirmation agreement, there are several things you should know.
A debt reaffirmation agreement is a legally enforceable document. This means that, if you sign it, you’re obligated to adhere to the terms or risk penalties under the law. This document basically states that you agree to repay a debt that would otherwise have been a discharge through Chapter 7 bankruptcy.
3 key elements must exist for debt reaffirmation to be legal
You can choose to repay a portion or all of a debt that would otherwise be discharged through bankruptcy. This is legal provided that the elements shown in the following list exist at the time:
- You are acting voluntarily and not under duress.
- You have filed a debt reaffirmation document in the proper court.
- The bankruptcy court has approved the agreement.
While it’s always best to act under guidance from an experienced Chapter 7 bankruptcy law attorney, you are not required to do so. However, experienced guidance often keeps people from making mistakes that can wind up making their financial situations worse instead of better.
Are there benefits to reaffirming a debt after filing for bankruptcy?
In certain circumstances, it might be within your best interests to sign a debt reaffirmation agreement. An example might be if you only have one vehicle, and the creditor is having it repossessed as part of bankruptcy proceedings. You might have no other means of transportation to get to work and are not able to purchase a new vehicle.
If you can commit to paying back the loan, it might be a good idea to sign a debt reaffirmation agreement. Doing so means that you would keep your car and have a reliable means of transportation for work. However, it would also mean that you are responsible for paying back the loan according to whatever terms you and the creditor have agreed to implement.
Can you back out of a debt reaffirmation agreement?
You might sign a debt reaffirmation agreement, then quickly determine that you are not able to pay back the loan. If the bankruptcy court has not yet discharged your debts or more than 60 days have not passed since you filed the debt reaffirmation petition in court, you can cancel the agreement.