Most likely YES. Many people filing for Chapter 7 Bankruptcy can keep everything they have including any cars they are financing, leasing, or own. People that file a Chapter 7 Bankruptcy while financing a car, can generally keep their car in bankruptcy as long as they stay current on their car payments. Many car lenders will allow you to either, sign a new contract for the car (called a reaffirmation agreement) or keep the car as long you continue to make the payments as they come due (called “Retain and Pay”).
Financing A Car In Bankruptcy
Reaffirmation agreements are usually sent to your attorney by the car lender during your bankruptcy case. Most reaffirmation agreements (just a new contract) have the same terms as the original contract you signed. Once you sign a reaffirmation
agreement and it is approved by the Court, your obligation to pay that debt back is NOT discharged in your bankruptcy case. Meaning you will be responsible to pay that debt back to the lender.
“Retain and Pay” is an internal policy that many car lenders have. It means they agree to uphold their end of the bargain as long as you stay current on your car payments. Many lenders would rather you keep your car, and that you continue to make the payments. Subject to the auto lender agreeing, a “Retain and Pay” can usually be done if the reaffirmation agreement is not approved by the Court. However, there are some lenders that do not allow a “Retain and Pay”, which means the lender may end up repossessing your vehicle even if you are current on your post-petition payments.
Leasing A Car In Bankruptcy
What if you lease your car, can you keep your car in bankruptcy then? Typically YES. Although it is up to the bankruptcy trustee to assume or reject the lease, most of the time the bankruptcy trustee will reject the lease. This means you can choose to assume the lease with the lender. Assuming a lease means you agree to make the lease payments to the leasor (car leasing company). In return, the leasor allows you to keep the car in bankruptcy. As long as you keep current with the lease payments, the leasor usually allows you to keep the car.
Owning A Car In Bankruptcy
If you own your car out right, can you keep your car in bankruptcy? Typically YES. If you do not own real property and your biggest asset is your car, then you can probably keep your car in bankruptcy. Generally, most car owners that file a Chapter 7 Bankruptcy keep their car in bankruptcy.
Finally, even if you own real property (i.e. house), it is not the end of the world. In fact, you may still be able to keep your car in bankruptcy. However, your attorney will just need to look at your situation a little further.
In summary, the vast majority of people that file a Chapter 7 Bankruptcy keep their car in bankruptcy. This is true regardless of whether the car is financed, leased, or owned. To learn about Life After Bankruptcy click here.