How To Keep Your Car If You Are Going Bankrupt?

Someone is going bankrupt – such news can be scary, especially if that someone is you. Though it is true that bankruptcy solves many problems (such as it helps you to get rid of most of your debts), it also makes your personal and financial life more difficult at the same time. You will have great difficulty in getting credit cards, auto loans, home loans, and even employment. Like anything else, this option also has its pros and cons. If you are filing your petition under chapter 7, the chances are that most of your assets and properties will be liquidated, including your car. However, the laws also offer certain provisions that allow you to keep some of your assets (in legal terms, it is known as exemption). Following is a brief rundown on how you can keep your car even after the court grants you bankruptcy.

Reaffirmation Agreement

The most common option is to sign a reaffirmation agreement; it may allow you to keep your car even if you are going bankrupt. When you sign it, the original contractual agreement is reinstated, allowing you to continue making the monthly payments. Once the reaffirmation agreement is in place, you get the legal right to exclude auto loan from the list of dischargeable debts.

Make the Agreement Legitimate and Official

In order to make a reaffirmation agreement legitimate and official, you must file the same with the County court house. Here, it is very important to note that this type of filings are often not handled properly and thus may fall between the cracks, especially if you are not following up thoroughly with your lawyer. So, do not forget to discuss this in detail with your legal representative. After the agreement is filed, keep a copy of the contract to yourself. Most importantly, you will have to convince the court that you will be in a position to pay for it without making defaults even after going bankrupt. If the court is not convinced, your application may even get rejected straightaway.

Signing Such an Agreement Is Voluntary

No one can force you to sign a reaffirmation agreement. It6 has to be done at your discretion only. In fact, even after you have filed this agreement with the court, you will still have two months to change your mind. If during this period, you realize that you will not be able to be current on your car loan payments, you can rescind the agreement.

What If You Do Not Follow The Terms Of The Agreement?

If you fail to make the payments and do not follow the terms of the reaffirmation agreement, the lender may take help from collection agencies to get the money back. Anything that usually happens to a debtor who doesn’t pay the loans will happen to you. Your car can even be repossessed.

Different states have different provisions to follow when it comes to keeping a car even after going bankrupt. So, make sure you first get educated on the legal options available in your state before you make any move in this direction.

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Posted in Bankruptcy, Bankruptcy Laws | 2 Comments »

2 Responses to “How To Keep Your Car If You Are Going Bankrupt?”

  1. Betty says:

    Very useful and practical tips are given in this site. If we could follow these steps or life could become much easier. This is all about a dreadful thought of bankruptcy by this it means we have declared ourselves to be bankrupt not in a position to pay off the debts. If we have filed the case for bankruptcy under chapter 7 there are all possibilities that all our assets will be mortgaged and we lose all our control on the existing assets that we possess. What a big relief we can keep hold of our car by following these simple steps. Because car have become a necessity in everybody’s life. We are so dependent on them that we cannot imagine our life without it. And after declaring our self to be bankrupt we are not in a position to take auto loan or any other loan.
    But if we sign the reaffirmation agreement we are allowed to keep our car. So with this we can keep auto loan aside from this bankruptcy and pay monthly installment for the same. But to make this agreement legal we have to intervene with the court for this. To convince the court is very important after all lies with the court if the court does not agree with the plea he can reject this agreement which means your car will be withdrawn from you. So be punctual and alert as this is the only thing that you possess and is very necessary for sustain.
    In the end I must literally thank this site for giving supportive tips in deemed emergency how can we fight this miserable situation of out of funds with courage.
    One thing more with chapter 13 of bankruptcy the extension for debt is given so that we can possess all the assets that we have by paying regularly. With this chapter also we can possess our car.

  2. macc says:

    Bankruptcy does not mean that you will not be having any assets with you. You can keep your car with you if you fulfill some legal formalities, such as a Reaffirmation agreement. If you sign such an agreement, your original agreement will be continue till you make the monthly payments in time. When the reaffirmation agreement comes in place, it will be your legal right to keep your car with you and your auto loan can not be considered as dischargeable debts. For making it completely legal, you should file your reaffirmation agreement with the county court house and one more important thing is that you have to follow it very effectively because in such cases it is quite possible that the filings have not been considered properly. You have to provide some income proof which can show that you will be able to do the payments of auto loan after getting bankrupt. But the agreement should be done after doing a deep research of your circumstances, if you fail to make the payments in time, the creditor can g to take help from the collection agencies to get their money back. It is also important to study all the legal provisions of your state before signing any agreement.

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