When people file for Chapter 7 bankruptcy, one of the chief concerns is whether they will be able to keep their vehicles, whether they still have payments to make or if they have been unable to keep up with the car payments. There are two main options available for filers. This first of which is redeeming the vehicle for cash, but the more commonly chosen option is Reaffirmation.
What is it?
When a debtor files for Chapter 7 bankruptcy and they decide that they want to retain ownership of their vehicle, they can enter into a reaffirmation agreement. This agreement is made between the creditor and the person who is filing that states that the debtor agrees to partially or completely pay off the outstanding debt. When filing for a Chapter 7 bankruptcy, some of this debt may even be discharged based on the individual case.
The Road Less Taken
When filing for Chapter 7 bankruptcy, the second option, which is often used as a last resort, is redeeming the vehicle for money. This usually results in a lump sum payment that may be equal to, or less than, the total value of the vehicle in question. Since it means that debtors are left without a means of transportation, the more common option, as mentioned earlier, is reaffirmation.
If a debtor still owes payments on their vehicle, it is usually part of a “secured-loan agreement” that was agreed upon when the purchase was made. In these cases, the car seller has a lien on the vehicle that entitles them to repossess the car if the debtor misses payments. However, when a reaffirmation contract is agreed upon, the car sellers will not be allowed to repossess the car unless you break the terms of the new payment agreement.
You can keep your car, even if you file for Chapter 7 bankruptcy. Contact your local Hawaii bankruptcy attorney, Rick Abelmann or Chris Rollins, to file the right paperwork to do so.