Upon filing a Chapter 7 Bankruptcy, if you have an auto loan, most likely your lender will ask if you want to reaffirm your auto loan.  Reaffirmation agreement does not apply to Chapter 13 Bankruptcy.  When you reaffirmed a debt, you agreed to be on the hook on the debt as though you never filed for bankruptcy.  Your personally liability to the loan will survive the bankruptcy.  This means that the lender not only can repossess the collateral when you default on the loan but also can sue you and try to collect from you by wage garnishments, levy your bank accounts, or record a lien against your real estate.

So why would anyone what to reaffirm a debt?  Sometimes you can negotiate for a better terms like lower interest rates or longer payment plan.  Sometimes the lender makes it a condition that you sign the Reaffirmation Agreement in order for you to keep the collateral.

If you decide to reaffirm the debt, make sure that you can afford the payment and that the collateral is in good condition because you will be on the hook for the balance of loan even if you surrender the collateral to the lender, who will auction it off for a low price and make you pay for for difference plus costs.

Make sure you stay current on your reaffirmed debt because you cannot file another bankruptcy for awhile.

If you have questions, Muoi Chea Bankruptcy Attorney has offices in Sacramento, Stockton, and Fairfield, California.