Reaffirmation is rarely beneficial to you. Why? Because reaffirming debt means that you’ve decided to acknowledge the debt, restart the statute of limitations on collection, and give the creditor every opportunity to use the legal system to obtain the money through judgments, liens and garnishments.
Naturally, creditors encourage reaffirmation.
As a general rule for consumers, the presumption should be that it's never a good idea to reaffirm debt, particularly in bankruptcy. Before and during a bankruptcy, creditors will encourage you to reaffirm your debts. What that means is that the particular obligation they wish for you to reaffirm won't be included in the bankruptcy's debt-cleansing process. You'll go into the bankruptcy with the debt and, when you finish, you'll still have the debt.
But sometimes, due to guilt or the coaxing of a debt collector, consumers are tempted to revive an uncollectable debt and agree to pay it.
It never makes sense to reaffirm a debt for anything except, conceivably, a car.
In bankruptcy, court's permission needed to reaffirm.
If you want to reaffirm a debt in bankruptcy, you have to get the move blessed by the court. With an auto loan, the court is more likely to approve the request because you need transportation. There is one benefit to reaffirming a debt: If you reaffirm one debt and maintain a good payment history on it, you'll at least have one current loan showing in your credit report. That can build back your good credit that much faster after bankruptcy.
Is reaffirmation not a recognizable term? Maybe you’ve heard of these:
Reaffirming a debt goes by many different names: reviving, re-establishing and, sometimes, re-aging. What it means: Even though the debt is so old that it's passed the statutes of limitations so the creditor can't sue to force payment, you have decided to acknowledge the debt, restart the statute of limitations on collection, and give the creditor every opportunity to use the legal system to obtain the money through judgments, liens and garnishments.
The statute of limitations for forced collection varies from state to state. For credit cards, the period is usually between three to six years. While the rules may differ slightly in each state, the clock will usually start when the consumer goes into default, usually about 30 days after the last payment, says Rubin.
A bad debt can also stay on your credit report for seven years. Because most creditors wait six months to charge off a debt, that winds up being seven years and six months after the first delinquency. The clock starts when the original account goes to collections (internal or a third-party) or is charged off (whichever is earlier), according to the Fair Credit Reporting Act. Even if the debt is sold and resold to third-party collectors, it still has to come off your credit report when the original debt reaches its expiration date.
Watch out for tricky tactics to get you to reaffirm your debt.
In some states, acknowledging the debt in writing (or even by phone), will reset the statute of limitations on forced collection. This has led to a practice among third-party collectors called "duping," where the debt collector tricks the consumer into reviving a debt after the statute of limitations has expired.
The most common method of duping is: The consumer receives a letter informing him of a debt and neglecting to mention that the statute of limitations has already run out. At the end of the letter are multiple choice boxes: a) I owe the money, and here's the check; b) I owe the money, and here's a partial payment, or c) I owe the money, but I can't afford to pay right now. Check any box and you've just given the collector the means to sue you.
So if you're considering settling an old debt, don't admit to anything and get everything in writing before you pay the first dollar.
Whether you have unsecured credit cards, medical bills, personal loans or collection accounts, there’s help for you. The National Debt Relief Group offers a free consultation. You can fill out our Short Application and one of our debt specialists will contact you within minutes, or you can call now – (888) 703-4948.
www.nationalrelief.com