Recently on our bankruptcy forum a user asked, “I started a restaurant five years ago with a partner. Unfortunately, with competition and growing expenses we’re having trouble paying our bills. I need more information about filing Chapter 11 bankruptcy. I would love to keep the restaurant open, if possible.”
This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “If items are reaffirmed in bankruptcy and a credit report shows a zero balance because the items were discharged in bankruptcy, do you still owe the creditors?”
I really do not understand how reaffirmed items in a bankruptcy were ever reported to the credit bureaus as discharged items. Technically, when you reaffirm an asset during bankruptcy proceedings, you are giving the creditor a waiver on bankruptcy discharge. That is why a lawyer has to sign off on the reaffirmation agreement. Any default of the reaffirmation agreement will not be covered by your bankruptcy, and the bankruptcy court wants to be sure you know it.
You, therefore, have waived your legal rights for bankruptcy protection by signing off on a reaffirmation agreement. Whether or not an error has been made to a credit agency showing the items have been discharged and you have a zero balance is immaterial to the waiver.
Even though your credit report may not reflect you owe the money, you will still be expected to legally abide by the reaffirmation agreement. If you default on the agreement after signing it, you no longer have any bankruptcy remedy for up to eight years. The creditors can legally seek every avenue of collections at their disposal including filing lawsuits to obtain judgments for garnishments, attachments, and liens.
That is why many bankruptcy lawyers may be opposed to reaffirmation agreements. You are waiving one of your basic and Constitutional rights to the protection of your assets. Reaffirmation agreements do not improve your credit score, are usually always made in favor of the creditors, are not required by law, do not guarantee you will pay for the loan, and the debts covered by them cannot be discharged in bankruptcy.
On the other hand, if you signed a reaffirmation agreement without the knowledge of your lawyer and the bankruptcy court and the items were actually discharged, you may have a legal case that you do not have pay the creditor. Creditors should insist that reaffirmation agreements be handled through a bankruptcy court. All reaffirmation agreements must be signed by a bankruptcy court representative to be legal and binding if a debtor has filed for bankruptcy.
Bankruptcy laws can be complicated. Contact a lawyer if you need help.If you live in or around the metropolitan areas of Harrisburg, Lebanon, or Carlisle, Pennsylvania, contact us at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area who can answer your bankruptcy questions.