As a consumer, it’s important to understand the terms and conditions of any agreement you enter into with a financial institution. When it comes to bankruptcy, the concept of a reaffirmation agreement may come into play. For those with an account at Ally Bank, it’s important to understand what this agreement is and how it can affect you.
What is a reaffirmation agreement?
When someone files for bankruptcy, they are seeking protection from creditors and attempting to discharge their debts. However, in some cases, individuals may choose to keep certain assets such as a car or a home. When it comes to secured loans, like an auto loan, the loan is attached to a specific asset. To keep that asset, the borrower may need to sign a reaffirmation agreement.
A reaffirmation agreement is a contract between the borrower and the lender that essentially renews the loan post-bankruptcy. By signing this agreement, the borrower agrees to continue making payments on the loan and is therefore able to keep the asset tied to that loan. It’s important to note that these agreements are voluntary and must be approved by the bankruptcy court.
Ally Bank and reaffirmation agreements
As an online-only bank, Ally Bank offers a variety of financial products and services, including auto loans. If you have an auto loan with Ally Bank and are considering filing for bankruptcy, you may need to sign a reaffirmation agreement to keep your car.
It’s important to understand the terms of this agreement before signing. By signing a reaffirmation agreement, you are agreeing to continue making payments on the loan, even in the event of financial hardship. It’s important to assess your ability to continue making payments before entering into this agreement.
Ally Bank does not require borrowers to sign a reaffirmation agreement, but they may choose to do so if they wish to keep their vehicle. If you do choose to sign, it’s important to ensure the agreement is approved by the court and to make payments on time to avoid defaulting on the loan.
The bottom line
Reaffirmation agreements can be an important tool for those seeking bankruptcy protection while also wanting to keep certain assets. However, it’s important to understand the terms of the agreement and assess your ability to continue making payments before signing. If you have an auto loan with Ally Bank and are considering bankruptcy, it’s important to understand your options and make an informed decision.