Reaffirmation of Debt

In a Chapter 7 bankruptcy proceeding, when a debtor wishes to keep an asset such as their car or house and do not want to have it liquidated, they must reaffirm the debt that is attached to that asset. Reaffirming debt means that the debtor confirms in the bankruptcy court that they wish to keep a certain asset and agree to continue to make payments on the asset to do so. This needs to be done because the purpose of the bankruptcy is to minimize debt payments by liquidating as many assets as possible so a distinction must be made between assets that the debtor agrees to liquidate and those they would rather keep. There is no guarantee that a debtor will be allowed to continue with a specific asset linked debt as there are limits to the value that can be placed on any asset for it to be deemed viable to continue. If the court believes it is not feasible to continue with the payments given the financial constraints of the debtor the reaffirmation will be ruled against. Once a debt is reaffirmed the creditor is allowed to treat the debtor as normal without any constraint of the terms of bankruptcy being held against them, i.e. normal debt collection practices will be allowed if the payments are defaulted on and no protection from the bankruptcy court would be forthcoming.

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