If you want to stay at home or need to keep driving, it can be helpful to get a confirmation agreement. However, this type of agreement means that you are still responsible for paying the loan in some way. Make sure you understand exactly how it works and your responsibilities so you don't owe money you can't pay.
What is reconfirmation?
The purpose of bankruptcy is to pay off some or all of your debt so that you no longer have to pay. However, in some cases, you may wish to reconfirm a specific debt and agree to pay some or all of the debt rather than cancel it.
For example, if you have a car loan, including it in your bankruptcy case will result in the loss of the vehicle. If you need a car for regular transportation, reaffirming this debt will allow you to hold on to it.
Reaffirmations are typically used in Chapter 7 bankruptcy cases where borrowers try to pay off their debts in full, rather than agreeing to a restructured repayment plan.
What is a confirmation agreement?
A confirmation agreement is a voluntary document that legally requires a borrower to pay some or all of its debt into a designated account, rather than paying it back in bankruptcy.
The agreement contains several pieces of information, including the amount of your confirmed debt, your repayment period, APR, collateral details (if any), and more.
If you wish to submit a reconfirmation agreement, you must submit it within 60 days of the first date of the bondholders meeting. After submission, the creditor must accept. Once this happens, the court will not approve the agreement until you are entitled to immediate release.
After you file an agreement with the court, you have 60 days from the filing date or the termination date, whichever is later, to change your mind and withdraw the agreement.
Confirm the role of the agreement
A reconfirmation agreement removes specific debts from your discharge and legally requires you to make payments in accordance with the terms of the agreement.
If your debt is secured, ie H. If your home or vehicle is used as collateral and you want to keep that collateral, a revalidation agreement will prevent you from losing it or going into foreclosure. It can also help reduce the damage bankruptcy does to your credit score.
However, reaffirming debt can represent a huge financial obligation and affect the validity of your bankruptcy. Because there's a limit to how many times you can file for bankruptcy, reasserting debts you know you can't pay will hurt you more in the long run.
What do people usually get confirmation agreements for?
Filing bankruptcy means you lose any collateral you still have to pay. For example, if your mortgage isn't paid off in full, the lender may take over your home if you file for bankruptcy.
A reinsurance agreement allows you to reach an agreement with a lender to maintain your collateral after you file for bankruptcy. Common types of loans where you can get a confirmed agreement are home loans, auto loans, or other important collateral that you use regularly.
How do you request confirmation of the agreement?
If you wish to apply for a confirmation agreement, you must agree to it after filing for bankruptcy but before paying any collateral to the lender. File an agreement by filing a letter of intent with the court. Then, you also need to send the Letter of Intent to the lender. Often, a bankruptcy attorney can assist you with a written and negotiated confirmation agreement.
After a written agreement is reached, a review may be held where a judge will review the agreement. The hearing ensures that everything is in the best interests of you and the lender. Once you and the lender have reached an agreement, you must sign a confirmation agreement document, and the agreement must be brought to court.
What happens if you don't sign the confirmation agreement?
The confirmation agreement is voluntary, so you don't have to sign anything. Having one is not necessary if you want to pay the debt voluntarily instead of including it in your bankruptcy.
It's also important to note that confirmation agreements can only be filed by debtors, so you don't have to worry about a creditor coming to an agreement with you. However, if you choose to pay off your debt rather than reconfirm or pay it down without a confirmation agreement, you could lose the assets that backed your debt and your credit will suffer even more.
However, if you file one and it is accepted by the court, you are required by law to make payment according to the terms of the agreement.
Can a confirmation agreement be submitted after discharge?
Once a relief order enters your bankruptcy proceedings, you can no longer recognize any debts contained in the relief agreement. The same applies if your case has been closed by the court.
Therefore, it is important to consider reconfirmation before the discharge date. Take some time to consider your situation, and consider hiring a bankruptcy attorney if they haven't already helped you decide.
Final result
If you file for bankruptcy, the confirmation agreement allows you to agree to pay some or all of your specific debts. This process will remove that balance from your relief, but it can help mitigate the damage bankruptcy does to your credit rating and allow you to maintain the collateral for your loan.
Before signing a reinsurance agreement, it is best to consult a bankruptcy attorney. An experienced attorney can help you determine if it's right for you and make sure you're doing everything right and in your best interests.
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