Is the Cancellation of Debt Reaffirmation Agreement Allowed in Bankruptcy?

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Is the Cancellation of Debt Reaffirmation Agreement Allowed in Bankruptcy?

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Filing for bankruptcy is the best way to get rid of your debts. Almost all your nonpriority unsecured debts can be discharged through bankruptcy. Once the debts are discharged, you have no obligation to pay them. Sometimes, people can opt for reaffirming their debts. This happens in case of secured debts. People have the option of either surrendering their property or keeping them by reaffirming their loan. The terms of reaffirmation are generally like the original agreement with the creditor. However, many time it so happens that after reaffirming a loan, you find it difficult to manage the payments. Instead of going under again after a bankruptcy discharge, a better option would be to surrender the vehicle and purchase a new one with lesser monthly dues. However, many debtors are worried whether this is allowed or not? According to lawyers of Dallas based bankruptcy law firm, it is possible!

The U.S. Bankruptcy Code has specified when a client can annul a Reaffirmation Agreement (11 U.S. 524(c)(4). This can occur under these situations (either of which occurs later):

  • Before receiving your bankruptcy discharge.
  • Within 60 days of filing the Reaffirmation Agreement with the court.

If you qualify in either of these categories and wish to exercise your right of rescinding the agreement, you need to notify your creditor about it. it is advisable that you send it in writing through certified mail with a return receipt. Once you have the return receipt, you can file the notification of the same with the court.

The ability to cancel the Reaffirmation Agreement allows the debtor a way out once they realize that they won’t be able to successfully go through the reaffirmation plan if they wish to lead a normal life after bankruptcy. Inability to maintain payments as per the agreement can throw you back under debt with no relief through even bankruptcy for a specified time frame. A Reaffirmation Agreement should not be signed without considering its implications and impact on your life post-bankruptcy discharge. An efficient lawyer can help you understand what ramifications Reaffirmation Agreement can have and despite the provision of its rescindment, the process is not to be taken lightly. You can seek guidance from experienced bankruptcy attorneys by calling 888-297-6023.