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Should you reaffirm your loan during bankruptcy

On Behalf of | May 3, 2021 | Bankruptcy |

Filing for bankruptcy can help those struggling with mortgage expenses, credit card debt and loan payments. Bankruptcy offers people a fresh financial start, free from the burdens of living to make the next payment.

Chapter 7 bankruptcies, otherwise referred to as liquidation bankruptcies, allow creditors to reclaim property funded by unsecured loans, such as your home or vehicle. While this may be a good opportunity for you to purge yourself of the property and start again, you may wish to keep your home or vehicle.

What is loan reaffirmation?

Reaffirming an unsecured loan enables you to keep your property and reassume the terms of the loan that you were paying prior to filing for bankruptcy, according to the U.S. Courts. It is critical that you are able to keep making payments on the loan after your bankruptcy is finalized, as you reenter the contract with the financial lender. You will not be able to file for bankruptcy again should you become unable to make payments in the future.

What are some things to consider?

Loan affirmation can be a great way to keep your property, and not have to look for a new home or apply for a car loan post-bankruptcy. Continuing your loan may also benefit the financial lender, and as a result, it may adjust the terms of your loan to help you. The institution may lower your interest rate or decrease your monthly payments in order to facilitate your ability to make monthly payments.

While reaffirming a loan is not ideal for every situation, it may help you regain footing as you begin rebuilding your credit following bankruptcy.