Keeping a Vehicle in a Chapter 7 Bankruptcy Filing

Reaffirming a Car Payment during or after a Chapter 7 Petition

As a general rule, in Chapter 7 bankruptcy filings, you can permanently discharge certain debts in exchange for relinquishing unprotected assets to the bankruptcy court. You can always protect any property you want to keep by “reaffirming the debt.” When you do that, though, you remain obligated to pay the full amount due. Accordingly, you can protect your car by reaffirming the debt, but you’ll still owe the principal balance on the car loan.

What Is a Reaffirmation of Debt?

A reaffirmation is nothing more than a new promise to pay the amount due on a debt. You can reaffirm any type of debt, from a car note to a consumer loan. In essence, you promise, in exchange for letting you keep your car, you will continue to make the payments due to the finance company.

The bankruptcy court will usually review any proposed reaffirmation to ensure that:

• You need to have a motor vehicle
• The payment you will be making is reasonable and within your means
• Having the car payment will not constitute a hardship to you and your family

It’s important to understand that, if you do reaffirm a car loan, the protections afforded by the bankruptcy laws will not apply to that debt. You won’t have the benefits of the automatic stay, so your lender won’t be limited in any efforts to collect from you, should you fall behind again.

Contact the Law Offices of Howard N. Sobel

Protect your rights in a consumer bankruptcy filing in New Jersey. For professional and knowledgeable legal counsel with a personal touch, contact our office by e-mail or call us at 856-424-6400 to see if you qualify for a free initial consultation (on selected cases). We are available evenings and weekends upon request.

Named a New Jersey Super Lawyer for Ten Consecutive Years