Clients often ask whether they may keep their car despite filing Chapter 7 bankruptcy. The answer for most people in Riverside is yes. If your car is financed and you do not have significant equity, the trustee and creditors will likely have no interest in the vehicle. As a result, the only person you will need to work with is the finance company.
In a chapter 7 bankruptcy, the only guaranteed way to keep your vehicle is by signing a reaffirmation agreement. A reaffirmation agreement is an agreement between the debtor and the creditor agreeing to a new contract that survives the current bankruptcy. A reaffirmation is necessary in order for a creditor to pursue a debtor if they were to stop making payments on the vehicle. In many cases, a debtor may not sign a reaffirmation agreement but continue to make payments on the vehicle in order to keep it. While many creditors may be happy with this arrangement, there is no guarantee that a creditor will not take back the vehicle. The only guaranteed way to keep a car in bankruptcy is by signing a reaffirmation agreement. As part of that agreement, you will also need to demonstrate that you have sufficient income to make payments on the vehicle and that those payments are not an undue hardship. If you cannot demonstrate that, you may need your attorney to sign a document that you can afford payments or a judge will need to approve the agreement. Ultimately, the court wants to assure that you are not being influenced by the creditor to enter into an agreement you cannot afford. Even if you sign a reaffirmation agreement, you will have an additional 60 days to rescind that agreement should you later realize the agreement is not in your best interest.
It is important to consider whether or not a reaffirmation is your best option before signing the agreement. While it may seem easier to sign and keep the vehicle already in your possession, you may be better off letting the vehicle go and buying something more affordable or reliable. Ultimately, bankruptcy is about a fresh start without the burden of debt. Entering into a reaffirmation agreement that you cannot afford will negate the fresh start. So while it may be possible to keep your car or truck through bankruptcy, bankruptcy is a good time to reconsider your options and decide whether keeping the vehicle is in your best interest.