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Benefit from the Experience of Attorneys Bill and Valerie Sherman Former Assistant Attorney General, Assistant County Attorneys and Magistrate Judge

We Want to Keep the House: What is a Reaffirmation Agreement?

Question: I want to keep my house. I'm filing bankruptcy because I have too much credit card debt, medical debt and I'm being sued by a company for a repo on a car. My husband and I opened a business in Sandy Springs (a restaurant) that failed but the food was really good. We live in Cumming in Forsyth County. And we have an investment property in Roswell and an apartment in Alpharetta.

We both work. My husband is in sales in Duluth and I work in Woodstock with a cousin who does pet grooming.

What's this about a reaffirmation agreement? We want to know how it works.

Answer: When you file for bankruptcy, all debt that you owe at the time of the bankruptcy is included. This includes mortgages, car loans, credit cards, medical debt, etc.

Mortgages and car loans are secured debt. That is, if someone fails to make the agreed upon payments in a timely manner, a house can be foreclosed and a car can be repossessed. When an individual files for bankruptcy protection, however, that person can indicate his or her intentions with regards to the loan. That is done on the bankruptcy petition.

This intention indicates whether or not you would like to retain the property and reaffirm the debt. In your case, you are indicating that you would like to retain the property and reaffirm the debt.

For those who file a bankruptcy when their mortgage lender is a bank or other finance company, the bank will then issue a "reaffirmation agreement." By signing the agreement, the debtor (the individual filing for bankruptcy) remains liable on the loan. With a reaffirmation agreement signed, it is as though the bankruptcy never happened for that loan.

Without signing a reaffirmation agreement, your liability is included in the bankruptcy. However, as long as you keep paying the mortgage, nothing will change in actual effect. The only thing that will change is that if some day you decided you cannot pay the mortgage you would be able to "walk away" from the house and your lender would not be in an advantageous position to pursue you to collect a judgment.

If you decide to sell the property in 5 or 10 or 20 years, for example, you would still be able to do so as the documents you executed at the closing would still be in effect.

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