Should I Sign A Reaffirmation Agreement Part II
In Part 1 of this article, I discussed the reasons you should NOT reaffirm a mortgage loan. The decision of whether or not to reaffirm a vehicle loan is more complex. While it is very rarely ever in anyone’s best interest to reaffirm a mortgage loan, it often may be in a Chapter 7 debtor’s best interest to reaffirm a vehicle loan. The main reason for this is that there is a pretty significant chance that your lender has the legal right to repossess your vehicle if you don’t sign a reaffirmation agreement – even if you keep current on all of your payments! If your loan documents specify that filing bankruptcy is itself an event of default (you will need to have an attorney review the documents in order to confirm this), then if you don’t sign a reaffirmation agreement, you are risking losing your vehicle. Now, most people rely heavily on their vehicles for their livelihood: to get them to and from work, to get their kids to and from school, grocery shopping, etc. Not many people are willing to risk losing their vehicle, however small or large that risk may be. So, most Chapter 7 debtors do end up signing a reaffirmation agreement when requested by their lender, and most attorneys will likely support that decision, as long as it does not appear to impose an undue hardship on the debtor to make the monthly loan payments..
The most important thing to note here, however, is that even with a vehicle loan, reaffirmation agreements are COMPLETELY VOLUNTARY. Your lender cannot force you to sign one. And if you are at all unsure about your ability to continue to keep up with your loan payments, then you should NOT sign a reaffirmation agreement, because if your vehicle is repossessed, you will not only be without a vehicle, but you will also be legally liable to your lender for the difference between what you owe on the vehicle and the amount your lender was able to sell the vehicle for, which could end up being tens of thousands of dollars. So, when it comes to reaffirming a vehicle loan, it is up to each individual to weigh the pro’s and con’s and decide whether signing is in their own best interest.
This blog was written by Holly McFall, Esq. of The Dellutri Law Group, P.A. Ms. McFall practices in the areas of Foreclosure Defense and Bankruptcy.
