Chapter 7 & car loan

Can I keep my car if I file for a chapter 7? This in the most common concern for people who file for a chapter 7 bankruptcy. A car loan is a secured debt, which means if you don’t pay it, the car can be repossessed by the lender.

In Chapter 7 bankruptcy, when you fill out the bankruptcy forms, you must tell the court and your creditor what you intend to do with the property securing a debt. For example, you have three options:

  • Reaffirm – keep the vehicle if you’re current and can afford to continue making monthly payments; 
  • Redeem – pay the value in one lump sum payment; or 
  • Surrender – give it back to the lender. 

Whatever you choose you must tell the court by filing a statement of intention. Most people prefer to reaffirm the car loan. However, reaffirming a debt is a serious financial decision.  

A reaffirmation agreement is a voluntary agreement between you and creditor to repay the loan. A reaffirmed debt remains your personal legal obligation. It is not discharged in your bankruptcy case. That means that if you default on your reaffirmed debt after your bankruptcy case is over, your creditor may be able to take your property. 

When a debt is “reaffirmed”, you will be personally liable for the debt even though you have received a bankruptcy discharge. In other words, not only can the creditor proceed against any collateral securing the debt, but the creditor can collect the debt from the debtor directly.  

Debtor should think very carefully before reaffirming a debt. That’s why is very important to consult with an attorney at Rivera-Law Firm P.A. before taking any decision. Call us 407-693-0039 or Click here to contact us.


Bankruptcy chapter 7

Federal Law requires that we inform you of the following: “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”