What is reaffirmation?

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When you reaffirm a loan, you are agreeing to continue the loan on it's current terms, in essence as if the bankruptcy had not occurred.

Reaffirmation in a Chapter 7

In a chapter 7, if the property secured by the lien has non-exempt equity, the trustee may decide to liquidate the property to pay unsecured debt.

In a chapter 7, if you owe substantially more on a loan than the property securing the loan is worth, you may want to consider redeeming the property from the trustee instated of reaffirming the loan. Redemption is available for vehicles other private property, not real estate. (learn more about redemption.)

Reaffirmation in a Chapter 13

If the property secured by the lien has non-exempt equity, that equity will be used in the calculation for the minimum amount to be paid to unsecured creditors over the life of the payment plan.

If the property secured by the lien has negative equity and is NOT your primary residence, you may be able to "cramdown" the amount of secured loan to the value of the collateral and bifurcate the remaining balance into an unsecured debt. (Learn more about mortgages and Chapter 13)

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