How Reaffirmation Of Debt Can Help You Keep Your Car In Chapter 7 Bankruptcy
When you decide to get out of debt by filing for Chapter 7 bankruptcy, your lawyer might talk to you about reaffirming some of the debts you have. While the goal of bankruptcy is to eliminate debt, you might have certain debts you will want to keep. A good example of this is a car loan. If you really want to keep your car and have a loan on it, you might be able to; however, there are a few things you should understand about this.
You Can Only Keep It If You Have Little Equity
The trustee assigned to your bankruptcy case will review all assets you own. The purpose is to determine if they will be exempt from your bankruptcy estate. If the assets are exempt, you can keep them. If they are not exempt, you may have to surrender them to the trustee.
There are a number of rules that help determine which classification to use for your assets, but there is one main one when it comes to a car you own. The trustee will look at the value of the car versus the amount you owe. If there is very little equity in this asset, the trustee will exempt it from the estate, which means you will have the option of keeping the car.
You Must Reaffirm Your Debt
If the trustee classifies your car as an exempt asset, you can keep it as long as your lender will agree to reaffirm the debt. To complete this process, your lawyer will send a letter to your lender. The letter will be a request for the lender to agree to reaffirm the loan. If the lender agrees, you can keep your car and your current loan.
Lenders will typically agree to reaffirmations as long as borrowers are current on their payments. If you are behind on your payments, you might have problems accomplishing this goal. If your lender will not agree to it, you may have to give up your car during your bankruptcy case, or you would have to pay off the balance owed in full.
You Will Have To Continue Paying The Debt
If your lender agrees to the reaffirmation of your loan, you must continue making your payments. In fact, as soon as you file for Chapter 7, you can stop making all the payments owed for debts that will be discharged; however, you should not stop making your car payments if you are planning on reaffirming the loan.
If you would like to understand how reaffirmation of debt may help your bankruptcy case, schedule a consultation appointment with a Chapter 7 bankruptcy lawyer, such as Donald T Tesch, PS.