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Glossary Term Explained:
REAFFIRMATION AGREEMENTA reaffirmation agreement is an agreement made between the Creditor and the Debtor to terms of a pre-petition debt that makes the Debtor legally obligated for the debt after an order of discharge has been issued by the court. There are several reasons that a Debtor would reassume the obligation of repaying a debt that would have otherwise been discharged under the bankruptcy. First, a reaffirmation agreement is often a condition by the Creditor to retain the collateral that is secured by the debt. Because the debt is discharged in the bankruptcy, without a reaffirmation agreement, the Creditor would not be protected by damage to the collateral or default by the Debtor. A second reason why the Debtor would place themselves back on the hook for the debt would be to reestablish their credit post-petition. Obviously, A Debtor's credit score is negatively impacted by the filing of a chapter 7 or a chapter 13 bankruptcy. Establishing a payment history after the filing of the bankruptcy is necessary to start the credit rebuilding process. A reaffirmation agreement on a debt to keep a car, house, or other secured property is often a logical place to start. Other reasons that Debtors consider to reaffirm a dischargeable debt may include a reaffirmation agreement that has more attractive terms then the original note, the risk of not being able to secure financing to obtain a needed vehicle after the bankruptcy, and other ancillary issues that may require the Debtor to maintain payments toward the debt.
FAQs relating to Reaffirmation Agreements
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