Our experienced attorney is happy to help you learn more about reaffirmation and redemption. These are financially-related legal situations that may come up in your bankruptcy case. It's important that you understand your case is unique. Talk to us about your needs today.
When a debtor (you) signs a reaffirmation agreement, you are excluding that debt from the bankruptcy discharge that you receive at the end of your case. It's the bankruptcy discharge that relieves you of any legal responsibility to pay back any of the debts that you owed before the bankruptcy filing. Thus, any debt that you "reaffirm" on will not be discharged in your case, and you will continue to be responsible for paying that debt back to the creditor.
The Court will usually allow you to sign a reaffirmation agreement with one or more of your creditors if such debt is secured by either an automobile or real estate (your home). One would not normally sign such an agreement on a credit card or medical bill or other unsecured debt. Whether or not you sign such an agreement is something that you will discuss with your attorney. Each bankruptcy filing is different. Why someone would or would not sign a reaffirmation agreement will differ.
A redemption is not a new agreement with a current creditor. Rather it's a new agreement you are entering into with another creditor you did not have before the bankruptcy. This redemption action is normally accomplished by the attorney filing a separate motion in your bankruptcy case asking the Court to issue an order determining a piece of property you have (normally this is involving your automobile) to be valued at a certain amount. The Court then orders that the current creditor holding a lien on this property must accept the payoff of that lien for that amount. Because this normally involves an automobile, the debtor must acquire financing from another creditor to complete the transaction.
A debtor would only do a Redemption motion in a Chapter 7 if it makes financial sense to do so based on the value of the automobile, the current outstanding balance, payment amount, and interest rate compared to the terms of the new car loan coming out of the bankruptcy. Redemption, essentially, is a way for the debtor to refinance their automobile at lower or better terms than they had before the bankruptcy filing.
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