Debtors may wonder if they can keep their vehicle in a
Chapter 7 bankruptcy case if they are still making payments on it. Others may wonder what can
happen if they have been unable to make payments but they still want to
retain the vehicle. Even though there are two options a debtor may have
in this type of situation, many revert to reaffirmation as long as they
are able to maintain their end of the deal.
Reaffirmation in Chapter 7 Bankruptcy
Reaffirmation is like renewing your agreement with the creditor or title
holder of the vehicle. The debtor and creditor define an agreement that
allows the debtor to keep the vehicle after their bankruptcy case is completed.
You may agree to repay all or a portion of the outstanding balance remaining
on the loan. Debtors may even qualify to have a portion of the outstanding
debt be discharged in their Chapter 7 case.
As mentioned earlier, a debtor has two options with reaffirmation being
one of them. The other option is to redeem the vehicle by making a lump-sum
payment that often adds up to be the vehicle’s total value. Most debtors
are not in a position to do this, making reaffirmation a realistic solution.
A vehicle that has payments still owed on it is part of a secured loan
agreement you originally made in the beginning. A lien against the vehicle
makes it possible for the lender to repossess it when payments are not
made. In Chapter 7 the lien still survives if you discharge what is owed
or payments you missed, but reaffirmation can help you keep your vehicle
when your case is completed as long as you make payments according to
the new agreement.