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ABOUT CHAPTER 7
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FREQUENTLY ASKED QUESTIONS

 

Bankruptcy Reaffirmation Agreements

If you desire to reaffirm any particular debt, you must enter into a written agreement with the creditor. The 1Clickbankruptcy program includes unlimited reaffirmation agreements for no additional fee, however, do not file the agreement with your petition. File it only after you and the creditor have both signed the reaffirmation agreement. Attach the agreement to the application and file it with the Court.

You have a right to reaffirm any particular contract as is; that is, with the original terms and conditions. However, if the value of the property is less than the amount you owe, you should re-negotiate the contract rather then simply reaffirming the old contract. Your secured creditor will likely re-negotiate.

Why? Because your secured creditor would rather have you reaffirm based on the true value of the collateral, rather than to incur additional costs and still only recoup the actual value. For example, let's suppose you owe $2,500 on your car loan, but the car is only worth $1,000. You can reaffirm the $2,500 balance or you can re-negotiate with the bank and offer to reaffirm based on the $1,000 value of the car.

While the bank is obligated to reaffirm the $2,500 contract, it does not have to accept your $1,000 offer. As a practical matter the bank will most likely accept the $1,000 reaffirmation agreement because it will cost the bank more to move the court for relief from the automatic stay, repossess the car, store it, and sell it at auction for a steeply discounted price. None of these additional costs are recoverable because the debt will be discharged in your bankruptcy.




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