Almost every new client who wants to file chapter 7 bankruptcy in Oklahoma doesn’t want to file “against” something. What the client means to say is that they would like to keep their house, or their car. When filing bankruptcy, it is impossible to “not file against” an item that you would like to keep. There is, however, a legal tool that can keep these items in your possession: reaffirmation.
A reaffirmation agreement in bankruptcy is a brand new contract a bankruptcy debtor signs with a creditor or lender, which reaffirms the debt along with the debtor(s’) liability for the underlying obligation. In layman’s terms: a reaffirmation agreement is a new agreement between the debtor (you) and the creditor (the bank) which allows you to keep the debt (or monthly payments) and the item (the house). Basically, you bring back to life the obligation that you put to bed in your bankruptcy filing.
In bankruptcy, the burden is put on the petitioner to list all of the debtor’s debts, obligations, liabilities into to the bankruptcy schedules and the filing of the bankruptcy petition triggers the “request” to discharge the listed debts with the exceptions of non-dischargeable priority debts and student loans (special unsecured debt). Unlike these non-dischargeable debts all other debts, including debts secured by collateral such as automobiles and home mortgages are subject to bankruptcy discharge and the secured creditor is able to exercise their rights to call in the secured property through repossession, foreclosure and/or any other legal procedures associated with the type of collateral.
In order to stop the secured creditors from taking away the secured property in exchange for the discharge of underlying debt, the debtor may either retain and continue to pay for the monthly obligations or enter into a reaffirmation agreement, which must be filed and approved by the bankruptcy court (a reaffirmation agreement is a legally binding agreement therefore you should consult an attorney before you sign anything).
In weighing the advantages and disadvantages of a reaffirmation, the first optimistic view would be to sign a reaffirmation agreement as a tool to start fresh and begin rebuilding you credit by having your monthly payments on reaffirmed debts get reported to the credit bureaus by these lenders. However, the pessimist side of me can’t avoid thinking about the possibility of falling behind on these payments and in the worst case scenario, loose the property via repossession or foreclosure, within the 8 years after the bankruptcy filing at which point the Debtor will become liable for any deficiencies after the repossession or foreclosure, which will not be dis-chargeable since it will be considered reaffirmed debt. In sum, it will have to be each Debtor (‘s) informed decision after weighing their priorities.