Reaffirmation is a voluntary agreement between the debtor and the secured creditor where the debtor agrees to pay all or a portion of an otherwise dischargeable debt after the debtor has filed for bankruptcy. When you file for bankruptcy, (most) of your debts are discharged. When you have a secured creditor, for a car or a mortgage, the secured creditor may demand that you reaffirm the debt. There are pros and cons (mostly cons) to reaffirming a debt. For a home, almost all home owners opt to continue to make the mortgage and retain their home. Especially in places like Oakland where the property value has depreciated considerably. As long as you are current, the mortgage holder cannot foreclose. A vehicle though is a different situation.

Most creditors holding a security interest in a vehicle will let you “pay and drive” where you continue to make the payments and you keep the car. Ford for example will not allow you to do this. For reasons that are unclear to me, they would rather take your car, not your money.

The downside of reaffirming the debt is that if you cannot make the payments down the road, you will be responsible for the loan. So, if you owe $10,000 on your car and they sell the car at an auction for $6,000, the lender can sue you for the deficiency. Had you not reaffirmed the debt, you would not be responsible since the debt was discharged through bankruptcy.

Whether to reaffirm the debt or not is an important decision and you should consult with your San Francisco or Oakland bankruptcy lawyers.

Disclaimer: Unless you have a fee agreement with us, we do not represent you. We are San Francisco and Oakland bankruptcy lawyers and handle cases throughout the Bay Area. Please call us to schedule a consultation with a bankruptcy attorney.