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Chapter 7 bankruptcy and the reaffirmation agreement

The decision to file for bankruptcy can be a difficult one to make. Many throughout Kentucky are concerned that they will not be able to keep their family home or their car. These concerns raise questions regarding where the family will live and how they will be able to get to work or school. Generally, these concerns are unnecessary even with a Chapter 7 bankruptcy.

With Chapter 7 bankruptcy, most debts are discharged and certain assets may be relinquished for liquidation under the supervision of the bankruptcy trustee. These assets are then sold to help pay off a portion of the debt owed. However, in many cases, the individual does have the opportunity to retain certain assets even if there is still a balance owed on them.

In some cases, the individual may want to reaffirm a debt that can be discharged as a part of the Chapter 7 bankruptcy. For instance, the individual may want to reaffirm the home mortgage or the car loan. This is generally allowed as long as the reaffirmation is voluntary, the debt that remains is not too great for the family to pay, and it appears to be in the individual's best interest. The reaffirmation agreement must be approved by the bankruptcy court.

While some of the concerns regarding filing for Chapter 7 bankruptcy are valid, many are a case of thinking the worst. When one is already sinking in a burden of debt, imagining the worst case scenario regarding bankruptcy proceedings and repercussions is easy to do. However, for many Kentucky residents who are struggling financially, bankruptcy is the solution.

Source: justice.gov, "Bankruptcy Information Sheet", Accessed on March 19, 2017

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