Redeeming & Reaffirmation

In bankruptcy, in the Middle District of PA, you have several options to handle debts that are secured by collateral, typically a home or vehicle. You may:

  1. Redeem the property
  2. Enter into a Reaffirmation Agreement
  3. Retain and Pay
  4. Avoid lien 

Redeeming Property – You may redeem property by buying the property at its fair market value (FMV). For example, if you owe $10,000.00 to your auto lien holder and your vehicle is worth $5,000.00, you may purchase it at FMV. This purchase must be done in a lump sum which makes it a difficult option for most families to take advantage of. 

Reaffirmation Agreements – A reaffirmation agreement is a contentious option. Some attorneys may encourage you to reaffirm while others stringently oppose. Why is this contentious? A reaffirmation agreement is a legally binding contract filed with the court that you will continue to be held liable for your home and/or car loan(s). If you reaffirm a debt and then fail to pay it, you will owe the debt the same as though you never filed bankruptcy. The debt is not discharged and the creditor can take legal action to recover a judgment against you. Click for a more detailed discussion.

Retain and Pay – Retain and pay is (for most) the most prudent option. You have the right to retain the collateral as long as you continue to make your payments. If you were to fall behind or choose to surrender at a point in the future, the lender cannot take legal action against you to recover a judgment. 

Avoid Lien – Lien avoidance should be discussed on an individual and personalized basis.  

Couple meeting a professional

Reaffirmation Agreement: In depth

Reaffirmation Agreements (pdf)