Keeping Your Car In a Chapter 7 Bankruptcy Case: Reaffirmation

Debtors primarily file Chapter 7 bankruptcy cases for the purpose of obtaining a discharge or release of the obligation to repay a debt. A discharge order at the end of a Chapter 7 case cancels or erases a debtor’s personal liability for most debts. The reaffirmation of a debt in bankruptcy is a voluntary agreement between a chapter 7 debtor and a creditor which provides that the debt to that creditor will withstand the effect of the bankruptcy case and not be discharged.

When a debtor agrees to reaffirm a debt to a creditor, he or she promises to continue repaying this debt despite any future discharge in the bankruptcy case. The creditor thereby agrees to not pursue certain remedies such as repossession provided that the debtor continues making payments in compliance with the reaffirmation agreement and the underlying loan agreement as applicable.

Obviously, reaffirming a debt has serious consequences since it eliminates a debt from being discharged. Prospective Chapter 7 debtors should consult an experienced and qualified bankruptcy attorney who may provide the required legal advice based on a prospective debtor’s unique financial facts and circumstances.

If a debtor files a Chapter 7 case and owes money on a motor vehicle, he or she may choose to reaffirm the debt in a Chapter 7 case and keep the car. Thus, a debtor will sign a new agreement with the creditor agreeing to continue paying for the car and remain liable for the debt in exchange for keeping it.

The reaffirmation agreement legally “re-binds” the debtor to the obligation as if the bankruptcy was never filed. All reaffirmation agreements must be reviewed and approved by the bankruptcy court. Debtors must sufficiently demonstrate to the bankruptcy court that the motor vehicle is necessary, which is rarely if ever difficult, and that the payment is not an undue hardship.

If you have purchased an automobile and are experiencing problems repaying the debt and are approaching default, call Loan Lawyers, Fort Lauderdale bankruptcy lawyers who help individuals with problems related to the payment of their debts. Contact our office today by calling 954-523-HELP (4357) and see how we can help.