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Paying back debt that would be discharged in bankruptcy

Financial challenges can take a toll on a person after several stressful months and years of dealing with debt. Once individuals are able to discharge that debt through bankruptcy, most are happy to move on with a fresh start in their life and a second chance at financial success.

The last thing it would seem a person may do after nearing debt relief is to agree to be held liable once again for the debt that was about to be discharged. Yet, on occasion, some individuals may find themselves in this situation, through a process known as reaffirmation.

As discussed previously in this blog, at the conclusion of a Chapter 7 bankruptcy, a person's debts are discharged. Sometimes, despite the impending debt discharge, some individuals may want to keep certain property like a vehicle. In order to do so, the person may decide to reaffirm the debt that would otherwise have been discharged in the bankruptcy.

The reaffirmation agreement between the creditor and the individual will make the individual liable to pay back the debt. The creditor then agrees not to take the property while the person continues to make payments on the debt. Accordingly, both sides stand to benefit in some respect from the agreement.

There are certain requirements that must be followed in order for a reaffirmation agreement to be effective, such as court approval prior to discharge in most cases. However, even if a reaffirmation is possible, it may not be appropriate or advised for all individuals, as each case varies depending on the circumstances.

Source:, "Your money: messing with a home loan during bankruptcy is a perilous game," Karin Price Mueller, May 14, 2014

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