Posts Tagged ‘auto loan and bankruptcy’

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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