Do I redeem or reaffirm debt for property I want to keep? Whats the difference?

First, be aware that only property subject to a security interest (i.e. where there is a secured debt for which the property is collateral, such as the typical a car loan) is property that you can be certain of keeping. Other property could be liquidated, or sold, to pay creditors, subject to the fact that bankruptcy law allows debtors to exempt certain property (up to a defined value) from being available for liquidation.

If it there a secured debt on property, the debtor has two choices if he or she wants to keep it:

• He can redeem the property, by paying an amount equal to the property’s current value. The amount has to be paid “up front,” as a single lump sum.
• He can reaffirm the debt, by agreeing in writing to keep paying it, while also agreeing that the debt will not be discharged by bankruptcy.

Redemption requires being able to pay off the value—not the loan; the current market value—of the property at once, while reaffirmation means continuing to pay the debt over time. Redemption is a good option when the current value of the property is considerably lower than the balance owing on the loan, as if often the case with car loans due to how fast most cars depreciate.

A bankruptcy attorney can help you determine which option is better for you.

Talk to a Bankruptcy Lawyer in your area to get qualified legal advice regarding your case.