What is a reaffirmed debt in Chapter 13 Bankruptcy?

A reaffirmed debt in Chapter 13 Bankruptcy is a debt that is not discharged, meaning it is not eliminated in the Bankruptcy. If a debtor reaffirms a debt, the consumer is making a legal agreement to pay it back during the Bankruptcy period-- typically over three to five years. The agreement must state what the debtor owes and what he or she will pay, and it must be approved by the court before it can be enforced. Reaffirmation of debt is typically done when the debtor wants to keep certain possessions that would have been taken away in Bankruptcy, such as a house or car. The creditor is usually willing to accept a lower payment in return for the debt being reaffirmed. This is important for the debtor because if the debt is not reaffirmed, the creditor can repossess the property once the Bankruptcy is finalized. Reaffirming certain debts usually has a positive effect on the debtor’s credit score. It shows that the debtor made a commitment to pay back the debt and can help the debtor to rebuild his or her credit after Bankruptcy. It is important to note that once the debt has been reaffirmed, the debtor is then responsible for paying it back in full. Before the debtor can reaffirm a debt, they must make sure that they can afford the payment plan and that it won’t put them in a worse financial situation. If the debtor is unable to make payments on the debt or it puts them in a worse financial situation, then reaffirming the debt is not a wise decision.

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What is a reaffirmed debt in Chapter 13 Bankruptcy?

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