Do Credit Bureaus Require Reaffirmation Agreements in Texas?
When you file bankruptcy in any state, including Texas, the court discharges your personal liability for most secured debts at the end of the process. However, the discharge won't release the bank's claim on the collateral that secured the debt. If you want to keep the collateral and have your payment information reported to the major credit bureaus, you must typically sign a reaffirmation agreement with the creditor.
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About Reaffirmation
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A reaffirmation agreement is a contract you and your creditor sign that reinstates your personal liability for a discharged debt. In most cases, the creditor will agree to this arrangement only if he believes you have the ability to repay the debt in full. A reaffirmation is a new contract, so it may have a different interest rate or term than your previous agreement.
Options
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If you don't sign a reaffirmation agreement, Texas creditors may be able to seize your property even if you continue to make your payments. However, if you do sign an agreement and later default on the debt, the creditor can repossess the collateral, and he can file a lawsuit against you for the remainder of the debt if the sale of the collateral doesn't cover it.
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Credit Bureau Implications
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When you discharge a debt through bankruptcy in any state, the creditor will no longer report your payments to the credit bureaus. Because the discharge eliminates your personal liability for the debt, the creditor can't report any information about you to the credit bureau regardless of whether it is positive or negative. If you sign a reaffirmation agreement, however, the creditor will resume reporting your payments.
Considerations
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Though it won't harm your credit report if you don't sign a reaffirmation agreement, it may prevent the creditor from reporting information that could improve your credit score. Failing to sign a reaffirmation agreement may also result in the loss of the debt's collateral, especially if you continue to miss payments. However, if you are far behind in your payments or don't believe you can afford to repay the debt, avoid reaffirmation because it allows creditors to sue you or report negative information to the credit bureaus.
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