If you declare bankruptcy, it doesn’t necessarily mean that you no longer have an obligation to repay a Texas creditor. In some cases, this is because the debt is considered to be a priority, which means it has to be paid regardless of your circumstances. In others, it is because you have reaffirmed your obligation to make payments as agreed to a particular lender.
Why would you reaffirm a debt?
Reaffirming a debt is the easiest way to maintain control over an asset. For example, agreeing to continue making payments on your car reduces the odds that it will be repossessed as part of a bankruptcy proceeding. The same may be true after agreeing to continue making mortgage or other loan payments. Taking such a step may also ensure that a creditor doesn’t object to your petition to seek protection from other lenders.
How do you reaffirm a debt in bankruptcy?
In most cases, you will sign a document acknowledging that you are liable for making payments during a bankruptcy proceeding. This document is typically signed after your petition is submitted to the appropriate authorities. However, you may also be able to negotiate an agreement to avoid a repossession or foreclosure prior to doing so.
Filing for bankruptcy may be an ideal way to obtain debt relief. However, depending on the circumstances of your case, it may be best to keep making payments to select creditors. Doing so may help to retain assets used to generate revenue that can make it possible to improve your financial situation before, during and after submitting a bankruptcy petition.