When to Reaffirm Debts During Chapter 7

For debtors who can’t afford to reorganize their debts through a Chapter 13 bankruptcy, filing for Chapter 7 is the alternative solution. Otherwise known as liquidation bankruptcy, Chapter 7 allows a bankruptcy trustee to take non-exempt assets from the debtor and liquidate them. The funds are then forwarded to creditors to repay the debt. Aside from working with a bankruptcy attorney to specify asset exemptions in Schedule C, reaffirming debt is also an action debtors should take during their Chapter 7 filing.

Understanding Debt Reaffirmation During Bankruptcy

The terms of a Chapter 7 bankruptcy allow the trustee to seize any assets that aren’t exempt from the filing. Working with a bankruptcy attorney will certainly help you protect your assets such as your home and car, but will also help you understand the nuances concerning debt reaffirmation.

Reaffirming debt is a way of letting the court and your creditors know that you want to keep a specific asset – and that you can continue making payments on that asset. When you start reaffirming debt during a Chapter 7 filing, however, it’s important to consider whether or not a Chapter 13 filing would serve you best, as Chapter 13 allows you to reorganize debts that you intend to pay back. Again, speaking about this more in-depth with a bankruptcy attorney will help you determine the option that’s best for your situation.

Furthermore, a Tampa bankruptcy attorney can guide you in determining which debts you do and don’t want to reaffirm. Certain debts that are secured debts such as an automobile loan, for instance, are a true necessity. The car as well as the attached automobile loan may be your only means of transportation to work, so this would be a debt that you would want to reaffirm during Chapter 7.

If you and your bankruptcy attorney decide that you want to reaffirm certain debts, then creditors will act as though the Chapter 7 filing never happened when they deal with those reaffirmed debts. This is why you and your bankruptcy attorney must choose whether to reaffirm debts through Chapter 7 or file for Chapter 13 instead.

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