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What is a reaffirmation agreement and when is it used?

What is a reaffirmation agreement and when is it used?

Q: What happens if I don't fix my mortgage?

If you don't fix your mortgage, it may lead to foreclosure. This means the lender can take possession of your home if you fail to make payments. If your mortgage is not reaffirmed, you may not be personally liable for the debt, but the lender can still pursue the property. It's best to seek legal advice to explore your options.

Q: Why would someone choose to reaffirm a debt?

Someone might choose to reaffirm a debt to keep the collateral, such as a car or home, and maintain a good relationship with the creditor. Reaffirmation can also help rebuild credit by showing a commitment to repay debts. However, it's essential to ensure that the reaffirmation does not create an undue financial burden.

Q: What is the purpose of a reaffirmation agreement?

The purpose of a reaffirmation agreement is to allow a debtor to retain certain secured assets, like a vehicle or home, while agreeing to repay the debt that could otherwise be discharged in bankruptcy. This helps the debtor avoid losing the asset and can also be beneficial for rebuilding credit.

Q: What happens if my mortgage is not reaffirmed?

If your mortgage is not reaffirmed, you are not personally liable for the debt after bankruptcy. However, the lender can still foreclose on the property if you fail to make payments. It’s crucial to understand the implications of not reaffirming and to seek legal advice if needed.

Full question:

What is a reaffirmation agreement and when is it used?

Category: Bankruptcy
Date: 04/07/2025
State: Alabama

Answer:

A reaffirmation agreement is an agreement between the debtor and creditor whereby the debtor agrees to repay a debt to the creditor which would otherwise be dischargeable in bankruptcy. Because the debtor is not legally obligated to repay a discharged debt, creditors often insist that a debtor reaffirm a debt secured by collateral, such a vehicle, or the creditor will reposes the collateral. Should the debtor decide to reaffirm a dischargeable debt, the court will often review the record to determine whether the reaffirmation agreement imposes an undue burden on the debtor and whether the agreement is in the debtor's best interest.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Can I sell my house if I did not reaffirm?

Yes, you can sell your house even if you did not reaffirm your mortgage. However, if the mortgage is not reaffirmed, the lender may still have a claim on the property. You will need to pay off the mortgage balance from the sale proceeds, or the lender may pursue a deficiency judgment if the sale price is less than the owed amount. It's advisable to consult with a real estate attorney to understand your specific situation.

What happens if I don't fix my mortgage?

Why would someone choose to reaffirm a debt?

What happens if my mortgage is not reaffirmed but still paying?

If your mortgage is not reaffirmed but you continue to make payments, the lender may still accept payments without pursuing foreclosure. However, you may not be personally liable for the debt if the mortgage is discharged in bankruptcy. It's important to keep records of your payments and consult with a legal professional for guidance.