Reaffirming Debts in Chapter 7 Bankruptcy - Total Bankruptcy
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Reaffirming Debts in Chapter 7

When filing Chapter 7 bankruptcy, there are three choices for dealing with secured debts: reaffirmation, redemption or surrender. Reaffirming debts in Chapter 7 bankruptcy is a process that lets a filer hang on to the property attached to the debt.

Here's a closer look at debt reaffirmation.

Keep Your Car: Reaffirming Debts in Chapter 7 Bankruptcy

One reason a filer might choose to reaffirm a debt is to keep necessary belongings (like a vehicle). The process of reaffirmation typically works like this:

  • The filer submits a petition: In the initial bankruptcy petition, filers are not required to indicate their plans for secured debts, but the asset (vehicle) and debt must be included in the schedules. This paperwork is simply the official beginning of the bankruptcy case.
  • Statement of intention: Within about 30 days of submitting the original petition, filers must decide (and let the court know) whether they plan to reaffirm or redeem their secured debts (or surrender the attached property).
  • Reaffirmation: Filers who choose to reaffirm debts agree to continue making payments as indicated in the original loan documents. After declaring intent to reaffirm debts, filers must stick to their original payment schedule for all reaffirmed debts.

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Reaffirming Debts vs. Redeeming Debts

Both of these choices allow filers to keep their property, but one usually works better than the other, based on the individual's circumstances. Here’s a look at the key differences.

  • Redeeming debts: This requires filers to repay a debt in one lump sum. The benefit of redemption is that filers are permitted to pay only the remainder of the debt up to the property's fair market value, even if they owe more on the loan. Of course, redemption may not work if a filer doesn't have enough cash to make a single lump payment.
  • Reaffirming debts: This permits filers to continue making gradual payments over the loan's natural life. The major disadvantage here is that a filer is required to repay the full loan amount, regardless of what the property is currently worth. But reaffirming debts in Chapter 7 is a much more affordable option for many filers.

Reaffirmation vs. Redemption: Which Is Right for You?

If you're interested in learning whether reaffirmation or redemption of debts would make the most sense in your Chapter 7 filing, you can take advantage of this offer for a free legal consultation. Simply fill out the case review form below to speak with a bankruptcy lawyer near you today.


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