More Answers to Common Bankruptcy Questions

Courtesy of the National Consumer Law Center and the State Bar of New Mexico

Do I Still Owe Secured Debts (Mortgages, Car Loans) After Bankruptcy?

Yes and No.

The term “secured debt” applies when you give the lender a mortgage, deed of trust or lien on property as collateral for a loan.  The discharge applies to secured debts which means the secured creditor can’t sue you after a bankruptcy to collect the money you owe. 

But, and this is a big “but,” the creditor can still take back their collateral if you don’t pay the debt.  For example, if you are behind on a car loan or home mortgage, the creditor can ask the bankruptcy court for permission to repossess your car or foreclose on your home.  Or the creditor can just wait until your bankruptcy is over and then do so.  Although a secured creditor can’t sue you if you don’t pay, that creditor can usually take back the collateral.

For this reason, if you want to keep the property that is collateral for a secured debt, you will need to catch up on the payments and continue to make them during and after bankruptcy, keep any required insurance, and you may have to reaffirm the loan.

How long will bankruptcy stay on my credit report?

The results of your Chapter 7 bankruptcy case will be part of your credit report for ten years.  The ten years are counted from the day you filed for bankruptcy.

This does not mean you can’t get a house, a car, a loan, or a credit card for ten years.  In fact, you can probably get credit even before your bankruptcy is over.  The question is, how much interest and fees will you have to pay?  And can you afford your monthly payments, so you don’t begin a new cycle of painful financial problems.

Debts incorrectly reported as having a balance owed will negatively affect your credit score and make it more difficult to get credit.

You should check your credit report after your bankruptcy discharge and file a dispute with credit agencies if the reported information is not correct.

What is Reaffirmation?

Although you filed bankruptcy to cancel your debts, you have the option to sign a written agreement to “reaffirm” a debt.  If you choose to reaffirm, you agree to be legally obligated to pay the debt despite bankruptcy.  If you reaffirm, the debt is not canceled by bankruptcy.  If you fall behind on a reaffirmed debt, you can get collection calls, be sued and possibly have your pay garnished or other property taken.  Reaffirming a debt is a serious matter.  You should never agree to reaffirmation without a very good reason.

Do I have to Reaffirm Any Debts?

No.  Reaffirmation is always optional.  It is not required by bankruptcy law or any other law.  If a creditor tries to pressure you to reaffirm, remember you can always say no.

Should I reaffirm?

If you are thinking about reaffirming, the first question should always be whether or not you can afford the monthly payments.  Reaffirming any debt means that you are agreeing to make the payments every month, and to face the consequences if you don’t.  The reaffirmation agreement must include information about your income and expenses and your signed statement that you can afford the payments.

If you have any doubts whether you can afford the payments, do not reaffirm.  Caution is always a good idea when you are giving up your right to have a debt canceled.

Which Debts Do I Still Owe After Bankruptcy?

When your bankruptcy is completed, many of your debts are “discharged.”  This means they are canceled and you are no longer legally obligated to pay them.  The discharge only applies to debts that arose before the date you filed.

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In Albuquerque, Giddens & Gatton Law,amp; Jacobus P.C. has bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases and can specifically provide advice as to bankruptcy and its alternatives.

The New Mexico firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law,amp; P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law,amp; P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.