What if I want to keep property and reaffirm debt in bankruptcy?

When a Californian is struggling financially and chooses to file for Chapter 7 bankruptcy, one of the trade-offs is that certain pieces of property might need to be sold to pay creditors back as much as possible. That is where the term "liquidation bankruptcy" comes from. Some properties are protected based on their value falling below certain limits.

After the case is completed and the debts have been discharged, the debtor will generally be free from their obligations. There are other properties, however, that the creditors will have the right to seize even after the debtor has been granted a discharge. If the debtor would like to keep that property, reaffirming the debt is an alternative. When a debtor chooses to reaffirm the debt and retain the property, the reaffirmation is an agreement that the debtor and creditor will make that the debtor is liable for the debt and will pay all or part of what is owed.

This debt would have been discharged in the Chapter 7. The creditor will agree that the property will not be repossessed provided the debt is paid. The reaffirmation must be done before the discharge has been entered. It must be in written form and filed with the court. If the debtor is represented by a legal professional, as it is wise to do, the lawyer is required to give written certification that the debtor was fully informed regarding the reaffirmation, it was done voluntarily and it will not create undue hardship.

There are many properties that a person would like to retain such as an automobile. The reaffirmation is a way to do it while still moving forward with a Chapter 7 bankruptcy. Having legal help from the beginning of the process to the end with all the different factors that arise is vital. A lawyer experienced in bankruptcy can help.

Source: uscourts.gov, "Chapter 7 -- Bankruptcy Basics -- The Chapter 7 Discharge," accessed Oct. 30, 2017