REAFFIRMATION AGREEMENT AND CAR LOANS

Here is a recent question I received about  cars and car loans in bankruptcy. The issue raised come up often because what is required in the bankruptcy petition and how debtors perceive those requirements are different. Debtors often think of things in terms of what I want to keep and what I want to get rid of. As a result, most debtors believe that they should not have to disclose information about their mortgage, home, car loan and vehicle since they want to keep those items.

But the fact is all assets and debts have to be disclosed. Hence, the mortgage and car loan have to be included in your bankruptcy petition even though you want to keep your home and vehicle. Now, there is a place for you to let creditors known of your intentions such as keeping the property, redeeming it or surrendering it.

 

Question

I’m so confused. I gave back the First Car but the Second Car  is the car in my name that my mother drives. I thought it was listed in the petition under the house for the things I was keeping…

 

Answer:

Thank you for your question.

While the Second Car  is listed in your bankruptcy as an asset and a secured debt, it does not mean that you cannot keep the vehicle. In fact, most people keep their vehicles when they file bankruptcy. There are two ways to accomplish this.
1. You can simply continue making the monthly payments and most, but not all, lenders will accept payment and allow you to keep your car.
2. Execute a reaffirmation agreement and either push for approval by the court or a Chim Order.
An approval means that you are personally liable even after a discharge in your current case. A chim order denies the approval of the reaffirmation agreement which means your personal obligation is discharge in the case,  but also prevents the creditor from repossessing the vehicle because of the denial. Obviously, this is more beneficial to a chapter 7 debtor.
Some lenders such as Wells Fargo Bank and Ford Motor Credit have being known to repossess vehicles if a reaffirmation agreement is not filed with the court. Hence, for these two lenders one should file the reaffirmation and request a chim order.
I hope this clarifies things for you. Please let me know if you have any other questions.