Should I reaffirm my car in a chapter 7 bankruptcy? You may be wondering how the bankruptcy will affect your ability to keep your car. Fortunately, in many cases, it is possible to reaffirm your car loan during bankruptcy and keep your vehicle. Here’s what you need to know about car reaffirmations in bankruptcy.
What is a reaffirmation agreement?
A reaffirmation agreement is a legal contract between you and your creditor. It allows you to keep your car, even though you are filing for bankruptcy. In a reaffirmation agreement, you agree to continue making payments on your car loan, and the creditor agrees not to repossess the vehicle.
Reaffirmation agreements are voluntary, you are not required to sign one in order to keep your car. However, if you do not sign a reaffirmation agreement the creditor may still be able to repossess your vehicle, even if you are current!! However, you won’t owe them another dime, since the debt was discharged in your bankruptcy case.
How does reaffirming a car loan work?
To reaffirm your car loan, you will need to sign a reaffirmation agreement. You need to file the reaffirmation with the bankruptcy court. You must file the agreement before your bankruptcy discharge. In the Chicago area, the judge will then review the reaffirmation agreement and your budget. The court wants to be sure it isn’t an undue hardship. If you can afford your monthly bills and the car payment, the court will allow the reaffirmation. If your budget is negative, the court may hold a hearing to see how you plan to afford the monthly payments.
Once you sign the reaffirmation agreement, you will be responsible for making your car payments as agreed in the agreement. If you fall behind on your payments after the bankruptcy discharge, the creditor can still repossess the car.
It is important to note that you have a limited time to rescind (cancel) the reaffirmation agreement if you change your mind. If you properly rescind the reaffirmation, the debt is covered by your bankruptcy discharge. Talk to your local bankruptcy attorney to see if you have time to rescind the reaffirmation.
Can I reaffirm my car loan in Chapter 7 and Chapter 13 bankruptcy?
You can reaffirm a car loan only in a Chapter 7 bankruptcy. There are no reaffirmations in a Chapter 13 bankruptcy case. However, you can structure your Chapter 13 repayment plan to include your car payment to keep your vehicle.
In Chapter 7 bankruptcy, you will need to make sure that you are current on your car loan payments before you sign a reaffirmation agreement. If you are behind on your payments, the creditor may not agree to a reaffirmation agreement.
In Chapter 13 bankruptcy, you can include your car loan in your repayment plan. This means you can continue making your car payments as part of your plan. If you complete your Chapter 13 plan and make all of your car payments, you will be able to keep your car.
Reaffirming your car loan can be a good option if you want to keep your car and can afford to make the payments. However, it is important to carefully consider your financial situation before signing a reaffirmation agreement. If you are struggling to make your car payments, reaffirming your car loan may not be the best option for you. Consult with a bankruptcy attorney to discuss your options and determine the best course of action for your situation.