Should you sign the Reaffirmation Agreement for your Car Loan in Chapter 7 Bankruptcy?

Your auto lender would prefer you sign and agreed to the reaffirmation agreement. A reaffirmation agreement if approved by the Bankruptcy Judge will make you liable for the car loan plus any costs relating to repossession and legal fees if you defaulted on the car loan. Call Muoi Chea, experienced Sacramento Bankruptcy Attorney for more information.

Had you not signed the reaffirmation agreement and the lender repossess your car but you received your bankruptcy discharge, all the car lender can do is take away the collateral, which is the car. The auto lender cannot try to collect from you the deficiency balance of the car loan after the auction or any costs relating to repossession and legal fees. It is to your advantage to not sign the reaffirmation agreement.

However, a few car lender requires you to sign the reaffirmation agreement in order for you to keep the car after your Chapter 7 Bankruptcy. Otherwise, the lender will ask for you to surrender the car back to them. At this point, you must consider the following factors before signing. (1) the condition of the car and how long will it be in working condition. If the car requires expensive repairs or beyond repairs due to high mileage, it might be best to give up the car. (2) affordability of car payment and related expenses. If you cannot afford your car payment, car insurance, car maintenance/repairs, it might be best to give up the car. (3) the value of the car compare to the loan balance. If your car is totaled, your auto insurance will only pay a percentage or up to of the value of the car. You get into financial trouble here, if you still have a large deficiency balance on the car loan after car insurance payment and at the same time you need to purchase another car. Luckily, most car lender so far did not require my clients to sign a reaffirmation agreement in order for them to retain and pay for their car.

Of course, a website is not intended to take the place of a bankruptcy attorney. Please consult a bankruptcy attorney if you have any questions. Muoi Chea is an experienced bankruptcy attorney in Sacramento California. Although she is a Sacramento Bankruptcy Attorney, she accepts cases throughout Northern and Central California. For example, Fairfield, Vallejo, Vacaville, Dixon, Woodland, Davis, Roseville, Rocklin, Tracy, Stockton, Modesto, Ripon, Folsom, El Dorado, Yuba, Elk Grove, Citrus Heights, Carmichael, Fair Oaks, Orangevale, Lodi, Galt, and other nearby cities in Northern and Central California.