Debt Reaffirmations in Missouri
Clients often tell me in the initial consultation that they want to reaffirm a particular debt.
Do a quick google search about reaffirmation agreements. You will find scores of posts that suggest that you must reaffirm secured debts in Chapter 7 bankruptcy. Therefore, it is important to know what reaffirming a debt means.
What does reaffirming a debt means?
You still owe the debt after bankruptcy, and if you don’t pay it the creditor can sue you.
Unfortunately, many bankruptcy lawyers to seem have bought in to this belief. They are mistaken and believe that the old practice of “pay & retain” is no longer an option. This is not correct in Missouri. A skilled attorney should carefully analyze a person’s overall financial situation before agreeing to reaffirm a debt.
An argument I hear in support of reaffirmation agreements is that it will help you rebuild your credit quicker. If I believed in conspiracies, I would suggest that this myth started with the car lenders. The truth is that they want you stuck in that upside down car loan at 20% interest. In a 2019 case from California the Court considered expert testimony regarding the impact of reaffirming a debt on credit scores and found any benefit to be negligible. The small positive impact on the credit score usually does not outweigh the potential harm of remaining liable on a debt.