Should you sign a reaffirmation agreement in Greensboro bankruptcy?
Image via Pixabay
When you file Greensboro bankruptcy, you can catch up on past-due debt with Chapter 13 or discharge lots of debt with Chapter 7. With Chapter 7, the process takes just a few months start to finish while Chapter 13 takes three to five years. However, sometimes there are debts you don’t want to include in your bankruptcy. In some cases, you can carve out exceptions, with the court’s permission, and sign a reaffirmation agreement with the creditor. But what if you change your mind?
What is a reaffirmation agreement?
A reaffirmation is a document representing a bargain between you and the creditor where you pledge not to discharge or alter the debt during your bankruptcy case, and they agree to let you keep the terms of the agreement. These are most often executed for car loans during bankruptcy but can apply to a mortgage or another financial arrangement. Signing this means you are no longer eligible for bankruptcy protection if you stop making payments later.
Why (or why not) sign a reaffirmation agreement?
Some debtors execute these arrangements if they have a co-signer that would be pursued by the creditor if the debtor discharges the debt. These agreements are voluntary, and a creditor cannot compel you to sign one. If possible, it’s best to try and NOT execute one and work out other arrangements. Here are some reasons to rethink a reaffirmation agreement.
- If you don’t need the asset, but want it, it’s likely best to let it go and be free of the debt.
- If you can get another one for less money after bankruptcy, why sign to keep it?
- If you can’t afford to keep up with the payments, you’ll probably regret signing it.
- If you’re already behind on payments, the reaffirmation may not help you at all.
- If you’re current on payments and can avoid signing the agreement, that’s better.
Can you cancel a reaffirmation agreement?
The reaffirmation agreement is much like any other contract in that you freely choose to enter into the arrangement. But the good news is, there’s a short window where you can change your mind, cancel the contract, and give back the associated asset. This lets you wash your hands of debt you may not be able to afford, for an asset you no longer want, or for an asset you can get a better deal on later.
How long do you have to change your mind?
If you sign a reaffirmation agreement, then have signer’s remorse, you can rescind it at a time that’s the later of:
- 60 days after your bankruptcy lawyer filed the agreement with the court
- Before the court issues the discharge in your Greensboro bankruptcy case
The document to rescind the agreement can be signed by you or your lawyer, submitted to the court, and notice must be sent to the creditor that you’ve canceled the reaffirmation agreement.
For what reason can you cancel a reaffirmation agreement?
You don’t have to explain yourself to the court or the creditor if you decide to rescind an affirmation agreement. Filing the document severs the arrangement, and your reasons are your own. The creditor can’t fight it or file to reinstate the agreement since the contract is voluntary, so long as you file it within the legal timeline for rescission. You shouldn’t enter lightly into a reaffirmation agreement because it invalidates the protection you were seeking when you filed Greensboro bankruptcy – to get yourself out of unmanageable debt.
Signing an agreement that carves out this debt means you might find yourself back in financial trouble later, particularly if the payments on the asset are unaffordable. If you only have a few months left on a contract, so that you have significant equity in the car (or another asset), it might make sense. Otherwise, this is something to be avoided so you can enjoy the full benefit of bankruptcy debt relief and protection.
To find out more about the benefits of bankruptcy, read reviews from our satisfied clients, then call us at 1-888-234-4181. Contact the Law Offices of John T. Orcutt today to schedule a free Greensboro bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.