Michigan Bankruptcy Law: The Reaffirmation Agreement
If you are filing Chapter 7 bankruptcy in Michigan, you may be asked to sign a reaffirmation agreement that would apply to a certain asset, such as a car or a house. In Michigan, the Bankruptcy Code includes a provision that allows a creditor whose claim is secured by personal property to repossess that property within 30 days of the filing of your Chapter 7 case, which means that your furniture or your car can be repossessed, even if your loan payments are up to date. A reaffirmation agreement allows you to keep them – and continue to make payments on them.
Essentially, a reaffirmation agreement is a confirmation by the debtor that they will still be liable for payments on a debt that could have been discharged in Chapter 7 proceedings. But they are not always a good idea.
When should you sign a reaffirmation agreement?
If you have a car that you would have to surrender under Chapter 7, a reaffirmation agreement assures that you will have transportation to and from work so you can afford to make the payments. Again, under Michigan law, a car can be repossessed even if you are up to date on your payments, making a reaffirmation agreement a good move if you want to keep your car. Not all car companies will send out the repo man if you file, so check with your attorney first before you sign.
When should you skip a reaffirmation agreement?
If the car you purchased was out of your budget, signing a reaffirmation agreement that will put you back into burdensome debt would not be a good idea. Additionally, if you are up-to-date with mortgage payments and are not at risk of foreclosure on your home, a reaffirmation agreement would not be necessary. A mortgage holder cannot foreclose on your home if you are not behind on your payments, even if you filed for Chapter 7.
There are also times that a reaffirmation agreement establishes payments that ultimately cost more than an item is worth, and if that item is something you don’t truly need, an agreement can be a costly mistake that would erase much of the benefit of filing Chapter 7 in the first place.
An attorney can help you determine if reaffirmation is right for you
If you are unsure about signing a reaffirmation agreement, consult your bankruptcy attorney to help you decide which move is in your best interest. For more information or to set up an appointment, contact Maxwell Dunn’s team at 248-246-1166.