Reaffirming Your Auto Loan In A Chapter 7.
Video Transcribed: Edward Kelley here with 888 Deadline answering your bankruptcy questions. Last video we talked about whether you should reaffirm your home loan. Now let’s talk about should I reaffirm my vehicle loan or let’s say any personal property.
Quick review, real property, home land, personal property, vehicles, stuff basically titled or not personal property. So let’s say you have a vehicle and you are current on it and you want to keep it again, if you’re behind, the only way you can force the creditor to allow you to catch up is through a chapter 13 bankruptcy.
Now you can file a seven and then the creditor can’t repossess it during the bankruptcy unless they file a motion to lift the stay, which stops them from collecting and a motion to abandon, meaning the estate abandons their interest in the property and they can do that during the bankruptcy.
You have an opportunity to object to that or your attorney and that can be held at a hearing before the judge. But if you are significantly behind, they’re probably going to be successful. But let’s say that’s not the case. You are simply entering into a bankruptcy with the vehicle caught up as.
In a home because of the automatic stay, many times if you have auto drafts or you know even mailing payments or website payments and they will stop taking them because of the automatic stay and you’ll have to go through their bankruptcy department. So be careful about getting behind. I should have said that in the other video, just because they stopped taking payments doesn’t mean you don’t owe them and that will all catch up with you after the bankruptcy.
But on a vehicle, there’s been a growing trend that regardless of whether your current, as soon as a bankruptcy is over car finance companies will repossess the car. And the bad news is they have a right to do so if you don’t sign the reaffirmation used to be that, although technically that was the law or the law could’ve been interpreted that way. They didn’t do that.
As long as you stayed current, you were okay and much like on a house some ways you were better off not reaffirming because if you get in trouble later, your personal liabilities already discharged.
All they could do is repossess the car. They can’t as they do so many times outside of bankruptcy, repossess the car, auction it for nothing, and then charge you the difference personally.
So used to be in many cases safer not to reaffirm, however, as opposed completely to real property and personal property. The creditor has a right, if you don’t reaffirm your loan to repossess the collateral, of course they’re supposed to go through the same process but you can end up, you won’t have any personal liability on that vehicle because that’s been discharged, but they can repossess the vehicle.
So if that vehicle is dear to you are the only one you have or you want to keep it, you absolutely must reaffirm it. And again, reaffirmation is basically a restatement of the loan and a new contract that survives with bankruptcy. It is not discharged. It will reinstate your personal liability. So if, your attorney, you should go over your reaffirmation agreement with you.
You should make sure the terms are correct. The interest rate and we’ll talk in another video. Although you can’t cram down the value of a car in a chapter seven you can reduce the interest rate. So that’s something you should definitely talk with your attorney about. Maybe that’ll be my next video.
So if the terms are all correct and you want to keep that vehicle, if you want to be safe, you better sign that reaffirmation. However, once again, you’re reopening yourself to personal liability by signing on the dotted line. But I have seen several cases and you know it depends to an extent on the creditor’s practices.
There are certainly still finance companies that will not repossess as long as you’re current. There are many that will and that can obviously be in their interest. They’ve gotten all your payments now they get to start over with somebody else.
So if you definitely want to keep your car, be careful in a bankruptcy, you had better reaffirm it. And I tell all my clients, you know, many people just because they have a vehicle, they’re horribly upside down, terrible payment rates. You know, they’ll never make back what they’re going to pay into it selling it. Just let it go. You know, they’re serviceable cars to be out there for a thousand, two thousand if you can get family to help you as a gift or after the bankruptcy, this is your opportunity. If you really want a fresh start and you’re making a $600 truck payment, you’re not really getting a fresh start.
So that said, if you’re determined to keep the vehicle, you better sign the reaffirmation agreement if you want to be safe. So that’s all for today on 888 Deadline. Again, if you have any questions, email me at firstname.lastname@example.org.