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Rebuilding Credit Post-Bankruptcy: What to Do if You're Falling Behind on a Reaffirmation Agreement

Sometimes post-bankruptcy, people who agree to sign a reaffirmation agreement over estimate their ability to live up to the payments agreed upon with a creditor. They tend to find themselves struggling financially to meet these monthly payments. In situations such as this, one should seek rescission or cancellation of the agreement.

A person struggling to meet the payments of the reaffirmation agreement should see if cancellation of the agreement is possible, or if there is a chance the creditor did not properly file agreement with the court; in that case the reaffirmation would be void.

However, these options may not available to the person in the agreement with a creditor, and then the item that was reaffirmed must be surrendered. It is important to check before surrendering the item if the creditor will take back the item in exchange for full forgiveness of debt. It is a long shot for the creditor to agree to such request, but still worth asking. If the creditor does not agree, see if selling the item yourself and setting up a payment plan to pay the debt's remaining balance is an option. There is also a chance the creditor will sell the item in an auction and then the balance of the debt would be the remaining payment. Selling the item yourself rather than the creditor in an auction will get you more money and then that money can be applied toward paying off debt faster.

With the remaining debt, a person should negotiate with their creditor to spread out the balance of their debt, therefore monthly payments are half of what they were under the reaffirmation agreement. Negotiation is key when deciding a payment plan. Do not settle for what plan a creditor puts on the table. As the one making the monthly payments, you have control in the situation, not the creditor.

Through these options one will most likely end up with a mark on their credit report, which does not look great after going through a bankruptcy. However, a 30-day notation is not as harsh looking to future creditors than having many months of 30-day late payments. Therefore finding a solution to get out of your reaffirmation agreement is more beneficial than letting the payments on the agreement get out of hand.

If one does see themselves struggling to make payments post-bankruptcy, they should ask themselves these questions:

1. Are you doing everything possible to rebuild your financial situation?

2. Is there anywhere you can cut back spending, even just temporarily, to save money?

3. What is one thing you can do today to improve your financial situation?

Taking time to ask these questions puts those recovering from bankruptcy back on track to a debt free life.

Works Cited

Ryan, Paula Langguth. Bounce Back from Bankruptcy: A Step-by-step Guide to Getting Back on Your Financial Feet. Tracys Landing, MD: Pellingham Casper Communications, 1998. Print.

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