Under normal circumstances, when you reaffirm a debt, you are required
to sign a contract with the lender that you are going to continue making
the payments until you clear all the balances. Such contracts include
taking mortgages or a vehicle loan. However, you need to be very careful
when signing such contracts as it may lead to be totally out of
bankruptcy. In other words, if you fail to make continuous payments, as
the deal requires, the lender has the authority to reposes the property
you acquired from the loan you were given, for instance, the vehicle you
bought and other personal properties to settle down the balances owed
Signing reaffirmation agreement has several advantages. These include the following:
First, since the debt by the lender doesn’t show the amount discharged
on your credit, then, you will continue to receive all the affirmative
impacts on your credit from regularly monthly payments.
Secondly, the agreement is a deal between the lender and the receiver so
that both negotiate for the better terms and conditions for the
existing loan. Therefore, the lender will be certain that the loan
receiver will not walk away without clearing the outstanding balances.
Thirdly, the reaffirmation agreement will be used to calculate the
interest rate deductions that will helpful to the person being advanced
with the loan, such that his/her monthly payments would be more
affordable. In addition, principal balance reduction will be indicated
Finally, upon signing reaffirmation agreement, you will be certain that
all the laws have been complied with and you will be sure that security
of your property. Therefore, the lender will not be able to repose your
property such as your vehicle unless you have defaulted in making your
regular monthly payments.
However, reaffirmation agreement has its drawbacks, and the following is the most common:
If you fail to clear all the outstanding loan balances, the property
acquired will be reposed to clear it. The worst-case condition is that
you are less likely to ask for another loan in the future. Some lenders
can blacklist your name and other lenders would shy away from you.
All reaffirmation agreement must done in the lending office upon which
the loan will be processed. The agreement must be witnessed and
thereafter signed by you (whom loan will be given), a bankruptcy judge,
and the lender. In addition, the agreement must approved by the court;
therefore, the loan requester and the attorney must appear before the
court to affirm your agreement before the judge that you will be able
repay the loan each month. However, most lenders charge additional fees
to facilitate the above extra steps.