When a customer or borrower files a Chapter 7 bankruptcy case, the debtor must file a Statement of Intent, which informs the court and the creditors what you intend to do with your secured debt. This means the debtor will indicate if he intends to surrender the collateral or keep it and pay for it.
One option that secured creditors have is to ask the debtor to execute a reaffirmation agreement. A reaffirmation agreement is a contract between the debtor and the lender whereby the debtor agrees to pay all (or a portion) of the money owed, despite the bankruptcy filing. Depending on the circumstances, a creditor may submit a reaffirmation agreement with the same terms as the original contract, or the terms may be altered. By signing a reaffirmation agreement, the creditor agrees that the debtor can keep the collateral as long as the debtor makes the required payments.
A debtor may be reluctant to sign a reaffirmation agreement because it removes the applicable debt from the bankruptcy. In other words, the debtor’s personal liability for the debt remains intact at the conclusion of the bankruptcy case. This is precisely why a creditor wants a debtor to sign such an agreement.
If you are interested in learning more about reaffirmation agreements or creditor’s rights in bankruptcy cases, please contact Windtberg & Zdancewicz today.
The attorneys at Windtberg & Zdancewicz, PLC, provide clients with experienced legal representation. We handle many types of business disputes on behalf of creditors. If you need assistance, or are interested in learning more, please contact us at (480) 584-5660.