Bankruptcy can be a scary time for families considering it as an option for eventually getting their finances back on track. Fortunately, there is an array of resources to help navigate you through this trying time, and you can visit Colorado's Bankruptcy Court website to learn more.
Bankruptcy proceedings have numerous ins and outs. There are many terms you need to familiarize yourself with, such as the concept of a reaffirmation agreement. Signing one can drastically alter the course of events during your bankruptcy, so you always want to speak to a legal professional first before signing any paperwork.
What does a reaffirmation agreement do?
After you file for bankruptcy, the lender may present you with a reaffirmation agreement. This is a legal document whereby the debtor still agrees to remain liable for all debts as though he or she never filed bankruptcy in the first place. Most lawyers agree it is a bad idea to sign this document because it takes away all the benefits the debtor would have received pursuing a pass-through.
The reason the lender has this document is that it wants to continue receiving payments instead of the collateral. The problem is that the court already discharged the debt, so any payments the debtor continues to make will not go on his or her credit report.
What is a pass-through?
Instead of signing a reaffirmation agreement, some people may want to sign a pass-through. This occurs when you file a Statement of Intention. By signing this, you would agree to continue making payments on a vehicle as pursuant to the original contract. After making all these payments, the debtor will receive the title from the lender. This is a great advantage when the only other recourse is to lose the car. When weighing the two options, you should consider signing a pass-through over a reaffirmation agreement every time.