Schaumburg Bankruptcy Attorney On Reaffirming Secured Debts

Chapter 7 cases also involve reaffirmation agreements on items such as jewelry, furniture and electronics that are purchased prior to the bankruptcy case being files.  If a person does not wish to reaffirm on those types of debts, then they have an obligation to either return those items or they can be sued in a replevin action and owe the fair market value of those items.  

I personally like to give my clients the best fresh start available.  I like to see my clients eliminate the most debt that they can.  I discourage somebody from reaffirming debt if it’s going to cause an undue hardship on them going forward or if the market value of the item is way below what the amount of the reaffirmed debt is. 

With regard to real estate in a Chapter 7 bankruptcy case, a client has the unique ability to continue to make the mortgage payment without signing for a reaffirmation agreement.  What this means is a debtor can technically surrender the house at any time in the future and the lender cannot pursue the debtor for any financial liability.  The lender does have the ability to foreclose upon the home and eventually affect the homeowner from the home; however, they cannot seek any dollar amount provided the debtor has not reaffirmed the debt. 

Many mortgage companies will send a reaffirmation agreement in the hopes that the debtor and the debtor’s attorney will sign the agreement.  In some parts of the country, this might be a common practice.  In the state of Illinois where I practice, reaffirmation agreements on mortgages are not something that I would recommend.  Firstly, the Bankruptcy Code does not provide for the debtor to sign a reaffirmation agreement on that particular item.  Secondly, I consider it malpractice if you hook a debtor back up on a debt that they can simply agree to pay voluntarily on their own.