Your Rights When Filing for Bankruptcy

Bankruptcy laws are complicated, and it’s often difficult to tell what your rights are when filing for bankruptcy, and what has to be done under law. Consumers do have some rights when filing for personal bankruptcy. Understanding these rights can help you make informed decisions about your financial future.

When you file for bankruptcy, you are offered the opportunity to reaffirm your debts. When you reaffirm a debt, you may be able to change the terms, including the payment amount, length of loan, interest rate, and amount owed. If you agree to a reaffirmation, you need to continue making the agreed-upon payments, and the loan is not discharged.

However, you do not need to reaffirm anything. Keep this in mind when filing for bankruptcy, because it’s often not in your best interest to reaffirm credit cards and other kinds of unsecured debt.

When reaffirming, you do not have to reaffirm under the same terms—you should negotiate for better terms with the lender before deciding to reaffirm. In addition, if you choose to change your mind after you reaffirm, you can do so up to 60-days after it’s filed with the bankruptcy courts. You must write a letter to the creditor, and they are required to return any money you’ve paid under the reaffirmation agreement.

When you file for bankruptcy, you may also try to redeem your collateral on a secured debt. When you redeem your collateral, you pay your creditors a lump sum of money for the amount the item is worth, rather than what you owe. This can be beneficial for items that depreciate quickly.