In Chapter 7, the lender will offer you an opportunity to reaffirm your house, car, or other credit account in which you pleadged items as security (i.e. electronic, furniture or jewelry store accounts) if the account is current. In some cases, the balance or interest rate will be reduced which in turn reduces your payment(s).

In Chapter 13, the amount you will have to pay is based upon the amount of debt that is to be repaid during the case for your car(s), secured accounts, leases, motgage arrears, taxes etc. However, this payment is usually less than regular contract payments because of the reduction in interest and possible reduction in principal balance.

One will be surprised at how quickly credit is extended after filing bankruptcy. Surprisingly, some of the very companies you had credit before will re-issue credit after the bankruptcy is complete. Why is that, you ask? Because credit card companies realize that majority, if not all, debts were just discharged resulting in the increased ability to repay the credit card debt. In fact, because of the formula for calculating credit score, it is very common for the credit score to increase while in bankruptcy.

A reaffirmation agreement is an agreement whereby you're telling the lender and the bankruptcy court that you intend to assume responsibility of the account such as an auto loan or home mortgage by maintaining future payments on the account.

The decision as to what account you decide to reaffirm should be considered carefully because (1) the debt will be considered non-dischargeable; and, (2) default on the account means that the lender can pursue collection of that debt through any legal remedies available to them which includes reposessions, foreclosure, judgments and garnishment.

You will still want to file bankruptcy because most creditors will pursue the deficiency balance from you. The deficiency balance is the amount that is still owed on the contract after the car, house, or other collateral goods has been surrendered. Most people owe more than what their house or car is worth. When those items are surrendered, the lender will try to quickly get rid of the car or house by selling at auction. You are still liable for the balance owed after the collateral has been resold so bankruptcy can remove that liability through the discharge.