Auto Loans

bankruptcy reaffirmation auto loan

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A Bankruptcy reaffirmation of an auto loan allows you to keep property by continuing to owe the bank after the bankruptcy filing. Reaffirmations are voluntary and drafted by the lender. Your attorney does not draft them.  Reaffirmations must be signed within 30 days after the 341 or property may be repossessed. The court does not need to approve a home mortgage or credit union debt reaffirmation. But bankruptcy reaffirmations on  auto loans and boat loans are common.  If you have a negative budget will more expense than income the court will not approve it.  The benefit of a reaffirmation is that the lender will normally report the payments made to the credit bureau if you will reaffirm.  You cant force the bank to reaffirm a loan.  They send the reaffirmation to you.

If you want to keep a car or home worth more than it’s lien, then reaffirmation may be a good option. Paying a reaffirmed debt on time after you file bankruptcy will re-establish credit. Reaffirmation is a good option in bankruptcy if your car is worth more than the debt. If not, now is probably the time to exchange it! You can change your mind and rescind a reaffirmation but you have to rescind the reaffirmation within 60 days of filing it and before discharge send it by certified mail.

Reaffirmations allow the bank to repossess the car and to sue for non payment. You have three options with your car or home after you file a bankruptcy:

  • If your car is unreliable and you owe too much you can surrender your car or home in bankruptcy and owe nothing, which is a good way to get rid of a lemon. However, then you need another car or home.
  • If you bought a good car or a good house for a good price and a good interest rate you can keep it by reaffirming the debt and paying the lender as if you have never bankrupted that creditor or
  • You can file a redemption and pay the replacement price for the auto or item if you owe too much.

Almost every lender will accept payments in exchange for not repossessing, If you don’t reaffirm, they wont report voluntary repayment to credit bureaus but you wont be sued for any deficiency  Often the bank offering a reaffirmation may add attorney fees to the loan if you file a reaffirmation. If you owe too much for your car consider filing a redemption or surrendering it. 722 Redemption may save you money by allowing you to pay the actual value of the car and not what you owe. (1-888-721-2800) If you have to surrender a car they may be able to put you into a different car.

See 11 U.S.C. §521(a)(2)(B), §524(c)(6)(B) 11 U.S.C. §524(m)(2).