If a lender asks you to reaffirm a debt, you will have to decide if it is the right choice for you. When you file for bankruptcy you have the right to surrender your collateral and have your debt discharged, meaning that you no longer have an obligation to repay the debt. You also have the right to reaffirm the debt, which means that you can keep your collateral along with your legal obligation to repay the debt. And your third option is to “retain and pay” which means you can keep your collateral for as long as you continue to pay, but you do not have the obligation to pay.
So if you want to keep your collateral, which is the better option, to reaffirm or to retain and pay? Sometimes a lender will offer you a slightly better deal to sway you to sign a reaffirmation agreement. Reaffirming debt comes with a few additional benefits. For example, you can rebuild your credit if you timely make your payments. If you do not reaffirm your debt, your payments will not show up on your credit report. You will continue to receive statements. If you do not reaffirm your debt, your lenders will stop sending you monthly loan statements and might prevent you from making online payments. To pay, you need to send a check. However, reaffirming debt has a huge downside. If you cannot make your payments going forward, you will not only lose your collateral, but you will also still be obligated on the loan. While you will lose your collateral when you cannot make payments after opting to retain and pay, your creditor has no right to sue you for the balance.