Most debtors who file bankruptcy are in a tough spot when it comes to their cars. Most of the time debtors who owe more on their cars than they're worth and really don't have room in their budget for a car payment still need a car to get to/from work. So what is a debtor to do about their upside down car loan?
There are a few options:
Number one, a debtor can ask for the car loan to be reaffirmed during bankruptcy. What this means is that you agree to repay the car loan and not discharge it in bankruptcy. Under a reaffirmation the debtor's car loan would not be discharged in bankruptcy and the debtor would be fully responsible for the car loan payments after their bankruptcy discharge. However, if they debtor fails to honor the reaffirmed car loan payments, the car could be repossessed.
Number two, if the bankruptcy judge does not approve the reaffirmation agreement, or if the debtor does not apply for a reaffirmation of the car loan, the debtor may still be able to continue to pay the car loan and keep the car. This is called "pay and drive." As long as the debtor continues to pay on the car loan, he/she can keep the car. Even if the car is worth less than the car payments/loan, it will still benefit the debtor because he/she will have a vehicle to use for going to/from work and other errands.
To find out more about how you can keep your car during bankruptcy, contact a Dallas-Fort Worth bankruptcy attorney today.