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Reaffirmation of Debt in Bankruptcy: Some Basic Principles

When you reaffirm a debt in a Chapter 7 bankruptcy, you are signing a legal document that removes that particular debt from the bankruptcy proceedings. The document would state that you agree to the original terms of the account and will continue to make payments as agreed. Most reaffirmations are done on big-ticket items such as a house or car — in other words, for secured debts that you wish to keep.

When you reaffirm a debt, you are pulling that debt out of bankruptcy protection permanently. The point of a Chapter 7 bankruptcy is to eliminate your debt and start you fresh on the road to financial recovery. Reaffirm a debt only if you are sure that doing so is absolutely necessary.

As it regards creidt card reaffirmation, If your primary reason is to keep the account open for your use, I’d advise against it. Why? There is no guarantee that the creditor will leave the account open. In fact, I believe it is unlikely that a reaffirmed account would remain open.

My suggestion for you is to acquire a secured credit card after your bankruptcy. The card account is secured by money you deposit in an account with the bank or credit union that issues the card. These cards provide the same conveniences as a regular credit card, and you should be able to qualify for one, post-bankruptcy. Compare secured credit cards carefully: Many have high fees, high rates or both. Be sure you are getting the card that meets your needs for the lowest fees possible.

When you begin to rebuild your credit after your bankruptcy, create a spending plan. That can help you know exactly where your money is going and ensure that you save some each month. The only sure way to avoid unwanted debt in the future is to set aside money for unexpected expenses we all encounter. Your goal should be to have three to six months’ living expenses in a liquid account that has limited access.

The Peck Law Group

About the Author

Attorney Adam Peck has been practicing law since 1981. A former successful business owner, Mr. Peck initially focused his legal career on business law. Within the first three years, after some colleagues and friend’s parents endured nursing home neglect and elder abuse, he continued his education to begin practicing elder law and nursing home abuse law.

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