Understanding Bankruptcy: Reaffirmation Agreements
Even if a debt can be discharged, you may have a specific reason as to why you will continue to repay it.
If you have insurmountable debt that you cannot repay, one option that you have at your disposal is to file for bankruptcy in Maryland. In a bankruptcy proceeding, you will be relieved of the need to pay most of your outstanding debts. The process by which you are relieved from your debts is called the bankruptcy discharge.
For instance, in order to keep your car, you may choose to work out a plan to continue to pay the lender on this piece of property. Your promise to continue to make this payment will be established in a reaffirmation agreement.
Establishing a Reaffirmation Agreement
To establish a reaffirmation agreement, you must sign the necessary documents and file them with the court. A reaffirmation agreement is always voluntary and established under special rules.
As dictated by federal law, a reaffirmation agreement:
• must always be voluntary;
• must not place a tremendous financial burden on you or your family;
• must be in your own best interests; and
• can be cancelled at any time before the court issues your bankruptcy discharge (or within 60 days after the reaffirmation agreement is filed with the court).
If you want to establish a reaffirmation agreement, and you are not represented by a Maryland bankruptcy attorney, then the court will conduct a hearing and decide whether your reaffirmation agreement should be approved. For a reaffirmation agreement to be legally binding, it must first be approved by the bankruptcy court.
Failing to Fulfill Your Reaffirmation Agreement
If you do choose to establish a reaffirmation agreement, and you fail to pay the debt, then you will owe that debt just the same as if there was never any bankruptcy proceeding. This means that the debt will not be discharged, and the creditor to whom you owe the debt can take collection actions against you.
Collection actions that a creditor may take include placing liens against your personal property, obtaining judgments to garnish your wages or bank accounts and repossessing your property.
ABOUT THE AUTHOR: Vijayan Law Group
Mr. Vijayan has concentrated his practice in the areas of Tax and Bankruptcy. Prior to joining Vijayan Law Group, he worked as an Associate in a Bankruptcy boutique and for a law firm specializing in taxation. Mr. Vijayan was a United States Peace Corps volunteer in Ghana, West Africa during 1997 – 1999, working in Micro-finance.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.