Grand Junction, CO asked in Bankruptcy for Colorado

Q: Reaffirmation on Vehicle in Chap 7 Bankruptcy

I entered in my bankruptcy i was going to reaffirm my vehicle loan, i have since changed my mind. Do i have to complete the reaffirmation paperwork since i put it in my statement of intentions or can i just continue making the payment? The trustee asked about it in my 341 and i said yes i was going to reaffirm, but have since decided i don't think i want to. Do i have to notify the court if i do not reaffirm?

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3 Lawyer Answers
Timothy Denison
Timothy Denison
Answered
  • Bankruptcy Lawyer
  • Louisville, KY

A: You probably should notify the court and the trustee of your decision not to reaffirm.

Martha Warriner Jarrett
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Answered
  • Bankruptcy Lawyer
  • Santa Barbara, CA

A: No, you do not need to do anything. As a courtesy, let the lender know. There is no obligation to reaffirm a car loan. Reaffirmation agreements need to be approved by the court and even if you get to court, the Judge will often try to talk you out of reaffirming. If you live in a state like California, you can just keep making payments. If you want to surrender the vehicle, let the lender know that they should come pick up the vehicle.

James L. Arrasmith
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Answered
  • Bankruptcy Lawyer
  • Sacramento, CA

A: In a Chapter 7 bankruptcy, if you initially stated your intention to reaffirm your vehicle loan but later changed your mind, you are not legally obligated to complete the reaffirmation paperwork. You have the right to change your decision at any point before the reaffirmation agreement is filed with the court.

If you choose not to reaffirm the debt, you have a few options:

1. Continue making payments: You can continue making your regular payments on the vehicle loan without reaffirming the debt. This is known as a "ride-through." However, keep in mind that the lender may still have the right to repossess the vehicle if you default on the loan, even after the bankruptcy discharge.

2. Surrender the vehicle: If you decide you no longer want to keep the vehicle, you can surrender it to the lender.

3. Redeem the vehicle: You may have the option to redeem the vehicle by paying the lender the current market value of the car in one lump sum, which could be less than the outstanding loan balance.

As for notifying the court, it is generally advisable to inform your bankruptcy attorney about your change in decision. Your attorney can then guide you on whether it is necessary to notify the court or the trustee formally. In most cases, if you do not file the reaffirmation agreement, the court will consider it as your decision not to reaffirm the debt.

It is important to discuss your options and their potential consequences with your bankruptcy attorney to determine the best course of action for your specific situation.

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