People often ask if they can keep their existing vehicles when they file for bankruptcy.  The answer is yes.  You can either surrender the car if you do not want to keep it or you can keep it and reaffirm the debt.

If you are current on your vehicle payments the lender will send what is called a reaffirmation agreement for you to sign.  Essentially that means you are reaffirming or agreeing to make good on your existing contract with the car lender.  The terms of the loans remain the same.  You are not refinancing or re-negotiating the terms of the loan or interest rate on the loan.

If you are not confident that you can afford the vehicle payments going forward, we do not recommend signing the reaffirmation agreement because if you default on the loan, the lender can come after you for the deficiency if they sell the car for less than you owe on it.  For example, if your car is worth $10,000 but you default and the lender sell it for $8,000, you will owe the lender $2,000 which they can try to collect against you.

Once you execute the reaffirmation agreement your payments should start reporting positively to the credit bureaus that you are making timely payments.  This will also help rebuild your credit score once your bankruptcy is complete which is a great opportunity for your fresh start.  We can help assess your car value and look at your budget to help you decide the best course of action with your vehicle.


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