Can I Keep My Car Or House If I Still Owe Money On Them In A Chapter 7 Bankruptcy?
Maybe. Depending on individual circumstances, if a debtor wishes to keep certain secured property (such as a car or house), he or she may decide to “reaffirm” the debt. That will require you to sign a reaffirmation agreement.
A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy.
In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt.
How Do I Reaffirm A Debt In A Chapter 7 Bankruptcy?
If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered.
The debtor must sign a written reaffirmation agreement and file it with the court. 11 U.S.C. § 524(c).
The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of disclosures described in 11 U.S.C. § 524(k). The disclosures must advise the debtor of the amount of the debt being reaffirmed and how it is calculated and that reaffirmation means that the debtor’s personal liability for that debt will not be discharged in the bankruptcy.
The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the debtor can afford to pay the debt they are reaffirming.
If the balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship, and the court may decide not to approve the reaffirmation agreement. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement.
The Bankruptcy Code requires a reaffirmation hearing if the debtor has not been represented by an attorney during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement. 11 U.S.C. § 524(d) and (m).
If you are considering filing for bankruptcy you should contact a bankruptcy attorney to help you explore your options. If you have questions about reaffirming a debt or are interested in filing for bankruptcy contact Rebecca Hurst of Hurst & Hurst Law at (859) 209-2101.