Most people want to keep their car or truck, even if it is subject to a “car loan”. However, even staying current on the loan may not prevent a repossession if you do not take certain additional required steps. In a Chapter 7 Bankruptcy, you can end up losing a car or other personal property under the bankruptcy laws, you can protect personal property from seizure to pay creditors if you “reaffirm the debt.” Reaffirming the debt essentially means that you acknowledge that you owe the money and indicate that you plan to keep making payments (i.e., you don’t intend to discharge the debt). It’s unclear, though, whether you have to have the reaffirmation approved by the bankruptcy court, or whether it’s sufficient to simply submit an application for reaffirmation. There is some precedent to suggest that the mere act of indicating that you plan to reaffirm the debt is sufficient.
It’s important that debtors understand this change in the bankruptcy laws. Before 2005, you could simply stay current on your obligations (after a discharge) and the lender could not repossess the collateral. Now, whether you are current or not, if you have filed a petition in bankruptcy and have not proposed to reaffirm the debt, the lender can take back the collateral.
To get a reaffirmation approved, you must prove to the court that making the payments on the note will not constitute an undue hardship. Your attorney can sign off on this for you, if your attorney reasonably believes that you will have the capacity to make payments, that you can reorganize other debts to make payments affordable, or that you have someone else who can make payments if you cannot. If your attorney is unwilling to sign off on the reaffirmation, the court can schedule a hearing to determine if the debt should be reaffirmed.
Regardless, before you can obtain a discharge, the application for reaffirmation must be submitted to the court. In addition, it’s wise to send a letter to every creditor with whom you wish to reaffirm, asking for the necessary forms.
Contact Neuner & Ventura, LLP
We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.