What Happens When You Reaffirm a Vehicle Loan While in Chapter 7

The Impact of Promising to Make Your Car Payments

What Happens When You Reaffirm a Vehicle Loan While in Chapter 7In a Chapter 7 bankruptcy petition, you’ll generally be allowed to permanently unload certain types of debt in exchange for transferring some of your property to the bankruptcy court, which will typically be sold to satisfy your creditors. In the alternative, if you don’t want to lose property in a Chapter 7 proceeding, you can choose to “reaffirm” the debt. In essence, that means you make a new promise to satisfy the obligation. To reaffirm any debt, you’ll typically have to sign a new agreement, promising to make the required payments in exchange for the right to keep the property.

Reaffirming a Motor Vehicle Loan during a Chapter 7 Bankruptcy Petition

You won’t be able to reaffirm a car note without the permission of the bankruptcy court. The judge will typically review the proposed arrangement to ensure that you need that car and that the amount you promise to pay is reasonable and within your means. You must also show that having and making the agreed-upon payment won’t impose an unreasonable hardship on you or your family. If you change your mind, you have up to 60 days from the date you enter into the reaffirmation agreement to rescind it and forfeit the vehicle.

A reaffirmation can give you the transportation you need to hold down a job, but you should think carefully before agreement to reaffirm a car loan. Once you do, you’ll lose all protections under the bankruptcy laws, including the automatic stay (with respect to the car only). That means a creditor may call, write or even take legal action if you fall behind, and your bankruptcy petition won’t protect you.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I provide a free initial consultation to anyone with questions or concerns regarding a bankruptcy filing. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.

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