Bankruptcy And Auto Loan Reaffirmation

One of the main concerns of those filing bankruptcy is losing their vehicle. You know how Americans are, they love their cars. Although, no one wants to lose their car to Chapter 7 bankruptcy but it might not be necessary. Most lenders will allow the debtor to keep their prized vehicle as long as they can stay current on their payments and sign a reaffirmation agreement. You're filing Chapter 7 and your bankruptcy attorney drops the bomb. What do you do? Well, if you want to keep your car, you will have to cooperate. All the reaffirmation agreement does is it takes a secured loan and moves it outside of the effects of a bankruptcy discharge. All you're saying is you want to keep everything status quo just as if you never filed bankruptcy.

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The idea behind filing Chapter 7 bankruptcy is to wipe out all your unsecured debts and stop creditors from calling you and chasing you down. Why would an individual want to continue on with a loan agreement? In a nutshell, in America everyone needs a car, unless of course you live in a place like New York City. For the most of us, riding the bus just doesn't cut it. If you can afford the payments and are happy with the vehicle that you are purchasing, it would be stupid to let it go. First of all, it's not going to be easy to get to get a loan for a new car immediately following the bankruptcy filing. There are lenders that will give you a loan but many times they will charge an exorbitant amount of interest. That's why it's a good idea to not rock the boat, but there're still some things to consider.

First of all, you need to evaluate your financial situation making sure that it will be affordable in the future. If you will barely be getting by making the car payment along with your household expenses after the bankruptcy filing has been discharged, you might take a serious look into looking for something cheaper. Always take an honest look into your crystal ball to see if anything might happen that could cause this to go south.

Next, the debtor should take a serious look at the current bluebook of the vehicle and what's owed on it. If you're upside down on the vehicle this would be the time to get rid of it. A Chapter 7 bankruptcy will wipe out any deficiency, limiting the debtor's future liability. If for some reason you can't afford the car in the future or you get in an accident where the car is totaled you will owe the difference between the bluebook and what is owed. If this happens post-bankruptcy the debtor will have no recourse to wipe out debt.

It's a good idea at this time to try and negotiate something with your lender. Even though you're filing for bankruptcy, in today's market banks do not want to take cars back. They know that if you're upside down on the vehicle they will be stuck with the difference. Some lenders are even willing to renegotiate the loan. When doing this always discuss it with your bankruptcy attorney. Your bankruptcy attorney will not like a client that goes rogue making decisions on his own that could affect the outcome of the bankruptcy.

An automobile is an important part of most people's lives and for some it's impossible to live without one. Consider all your options with your bankruptcy attorney before making the final decision to sign a reaffirmation agreement that you will be stuck with.

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