Reaffirmation Redemption

Reaffirmation Redemption

In a Chapter 7 Bankruptcy, you can keep property by reaffirming it or redeeming it.   If the property is worth less than what you owe on the property then you may offer the bank what the property is worth in a lump sum offer by filing a Redemption motion.   The judge would establish the reasonable value for the property.  For example, on a vehicle,  the Debtor would be required to pay the amount that the judge establishes to redeem the vehicle or another option would be to surrender the vehicle.  However, by redeeming the property,  this often allows you to pay far less than what you may owe for the vehicle.  722 redemption, a finance company, will often refinance the auto.

You may also simply continue to pay the bank what is owed on the property by signing a reaffirmation agreement.   Reaffirmation agreements simply return a person to owing for the debt.  However if you fail to pay for the item you may be sued.  The court has to approve reaffirmation agreements.   The Court will look at your budget in Schedule I and J of the Bankruptcy petition.  If the Debtor’s budget shows a negative disposable income and that he cannot afford the home, car or boat the court will not approve the reaffirmation agreement.

In cases where the court will not approve the reaffirmation agreement, the debtor may have to simply pay the loan without a reaffirmation agreement.  The bank will normally accept these payments and not repossess the item as long as the payments remain current and the item is insured.   However if you pay to ride and do not reaffirm most banks will not report that you are paying on time to credit reporting agencies.   One of the most important things that you can do after filing is to repay on time so that you can have a life after bankruptcy and repair your credit.

Attorney Nick C. Thompson Louisville Kentucky Bankruptcy reaffirmations Redemptions