Bankruptcy typically gives debtors a means of shielding themselves against creditors and stopping harassment for repayment of old debts. However, there are some creditors who are highly persistent in their collection methods, and who may continue to coax debtors into paying off these debts, even after they’ve already been discharged or are otherwise no longer collectable.
The process of a debtor reviving an old, uncollectable debt to pay it back is called “reaffirmation,” and it is almost never a good move from a consumer standpoint, especially when you’ve already benefited from the protections that come with bankruptcy.
Here’s an overview of debt reaffirmation and why you should avoid it after filing bankruptcy in Montgomery County, TX.
Creditors want you to reaffirm your debts
Both before and during the process of a bankruptcy, creditors will encourage you to reaffirm your debts. What this means is that the debt in question would not be included in the discharge process you’d get out of a bankruptcy. Instead, you’ll still have that debt when you come out of bankruptcy.
There are very few cases in which this makes sense. You may reaffirm a debt for something like a car if you intend to continue making payments on the car and maintain possession of the vehicle after your bankruptcy. But almost never will a bankruptcy attorney recommend that a client reaffirm a debt—it’s an inherently anti-consumer move, one that creditors will attempt to pursue out of desperation, knowing that their chances of recovering payment for a debt are rapidly slipping away when a debtor chooses to file for bankruptcy.
You should very carefully consider your options if reaffirmation is at all on the table for you. Do you really think you’ll be able to afford the debt moving forward? Is there an alternative option that would cost you less money?
If, for some reason, you do wish to reaffirm a debt in bankruptcy, you will still need to have that reaffirmation approved by the court. The court is more likely to approve reaffirmations of certain debts than others. Auto loans, for example, are more likely to be approved because you’ll still need to have transportation after you complete your bankruptcy case. Reaffirming debts for more frivolous purchases, however, is not only an ill-advised move for debtors, but also unlikely to be approved by the courts, because it is not in your best interest. But if keeping your vehicle is your only concern, you might not have to go through the reaffirmation process to accomplish that.
You might wonder why a person would attempt to reaffirm impractical debts. There is one benefit that comes with reaffirming a debt, in that if you reaffirm a debt and keep up a good payment history, you’ll have a current loan that shows up in your credit report, helping you rebuild your credit faster. However, in most cases, it’s better to bite the bullet and discharge all debts, taking the credit hit that comes with it.
For more information about filing bankruptcy in Montgomery County, TX, contact the office of James R. Jones, Attorney at Law.