Bankruptcy
Update:
What
is a Reaffirmation Agreement?
A Reaffirmation Agreement is an
agreement made during the pendency of a bankruptcy proceeding. It is an agreement between the borrower and
the lender that allows the debt to survive
the bankruptcy proceeding.
The good news is that they will report
to your credit your payments made post-bankruptcy. This allows you to rebuild your credit.
The bad news is that you will still be
liable on the debt. As most car loans
tend to be upside down, the borrower is effectively borrowing a ton of
unsecured debt. If they are unable to
continue making payments, then not only will they lose the car, but they will
be sued for the deficiency balance.
I don’t recommend my client’s sign a
Reaffirmation Agreement very often. I
like to provide my clients with a fresh start after filing their
bankruptcy proceeding. In fact, for most
institutional lenders, it isn’t even necessary to sign the agreement to keep
the car and keep paying on the loan. If
at a later time you ca not pay, then they would only be able to pursue you for
the vehicle and not the deficiency.
Don’t blindly sign a Reaffirmation
Agreement. They usually are not the
right call. Seek legal counsel before
you do!
Call us at
253-471-1200 to schedule a FREE one-hour bankruptcy consultation at any of our
offices in Tacoma, Seattle, & Kent.
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