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reaffirmation of debt

Bankruptcy law generally allows you to break your contracts with creditors to help you get out of debt. But sometimes you may want to keep a home mortgage or car loan as you work to recover from your bankruptcy. Reaffirmation is a process in bankruptcy where you agree to remain responsible for the debt or loan so that you can keep the property (house or car) that is securing your repayment of the loan.

In reaffirmation, you and the creditor enter into a new contract—usually on the same terms—and submit it to the bankruptcy court for approval. You will have to be current on your payments of the loan, and you must be eligible for a bankruptcy exemption that will allow you to protect all of the equity in the property securing the loan you want to reaffirm.

In Texas, reaffirmation during bankruptcy is a legal process where a debtor chooses to keep certain secured debts, such as a home mortgage or car loan, and agrees to continue paying them despite the bankruptcy. By reaffirming a debt, the debtor and the creditor enter into a new contract, which typically retains the same terms as the original agreement. This new contract must be submitted to and approved by the bankruptcy court. To be eligible for reaffirmation, the debtor must be current on the loan payments and must have sufficient bankruptcy exemptions to cover the equity in the property. It's important to note that reaffirmation keeps the debtor legally obligated to pay the debt, which means that if the debtor fails to make payments, the creditor can repossess the property and the debtor could be liable for any deficiency balance. Debtors considering reaffirmation should consult with an attorney to understand the implications and ensure that it is in their best interest.

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