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Reaffirmation agreements in Minneapolis Chapter 7 bankruptcy could give you options to repay your debts and keep your assets. Before you agree to this arrangement, you could benefit from a discussion with a dedicated Chapter 7 bankruptcy attorney.
In a Minneapolis Chapter 7 bankruptcy case, reaffirmation agreements are contracts between debtors and creditors. You make such an arrangement during the course of your bankruptcy case, and it allows you to keep property you used as collateral for a loan after voluntarily committing to continued payments.
These agreements are most often for important assets, such as your home or vehicle. Reaffirming your mortgage debt could help you avoid foreclosure, while entering into an agreement for your car loan could prevent repossession.
There are limits on when and how you can reach such an agreement. First and foremost, the court must approve the contract before it can take effect. Bankruptcy judges look at each agreement on a case-by-case basis to decide if they are in the best interest of the debtor, and if repaying the specified debts is feasible. If a judge determines that you will face undue hardship in attempting to make these payments, they can reject the agreement entirely.
If the court approves a reaffirmation agreement, it becomes an ongoing obligation during and after your bankruptcy case. If you fail to make payments on time, your creditor has the opportunity to take legal action against you to collect on the debt. This typically involves repossessing the collateral you used to secure your loan.
There are benefits and risks that come with these agreements. It is in your best interests to discuss your options with an attorney before agreeing to reaffirm any debts.
Filing for bankruptcy means you have the opportunity to discharge most of your debts and be free of those obligations. At times, however, you might benefit from reaffirming your debt—for example, if you hope to retain your home or vehicle.
While you can discharge many of your debts during Chapter 7 bankruptcy, doing so could cost you property you used as collateral for a loan. When you finance a vehicle, the lender typically holds a lien on the car or truck as collateral. If you want to avoid repossession, you will need to reaffirm your debt. In some cases, you may also be able to negotiate better terms with your lender through this process.
There are other reasons why making a reaffirmation agreement for a Chapter 7 insolvency case in Minneapolis might be in your interest. Because the agreement requires you to make payments on reaffirmed debts, it could help improve your credit score following bankruptcy. Discharging debts and even filing for bankruptcy can have a negative effect on your credit score, but these payments could help negate that impact.
The decision of whether to reaffirm a debt obligation or not can be difficult. In some cases, it can allow you to remain in your home or keep your only method of transportation to and from work.
Not everyone benefits from reaffirmation agreements in Minneapolis Chapter 7 bankruptcy cases. To learn about your options, reach out to us as soon as possible to schedule a private case evaluation.
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