When filing bankruptcy do I have to sign a reaffirmation agreement?

logo-squareDuring a bankruptcy filing, most people wish to keep their home and vehicle. In some cases, secured creditors will ask people filing bankruptcy to sign a reaffirmation agreement. In nearly all cases, this is not a good idea for a number of reasons.
What is a reaffirmation agreement?
Reaffirmation agreements are in effect an agreement that you owe a lender money. One of the things that many bankruptcy filers are unaware of is that when they file bankruptcy, the promissory note portion of the mortgage is part and parcel of the bankruptcy. If you do not sign a reaffirmation agreement, and later have trouble paying your mortgage, the lender cannot hold you accountable for the debt. This also means if your home is sold for less than what you owe, the lender cannot successfully pursue a deficiency judgment.
Are there risks in not signing a reaffirmation agreement?
Yes, there are, the most common being your mortgage lender refusing to report your payments to the credit bureau. However, this will be mostly an inconvenience to you and your best course of action is to ensure that you are making payments on time after filing bankruptcy. As long as you are making your agreed-upon payments, the lender will not have grounds for foreclosure. It is also important to be aware that the lender may not continue sending you statements on a regular basis, making it even more important to keep up with your payments.
If you are facing foreclosure and use Chapter 7 bankruptcy to halt the proceedings, before you agree to sign any documents, talk to a bankruptcy attorney at Savage Law Firm. In most cases, it is not a good idea to sign a reaffirmation agreement as you may be forfeiting some rights if you do so.

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