If your car is paid off, you will be able to keep it, so long as the value of the car is below California’s vehicle exemption amount or wildcard exemption amount. However, if you are making payments on or leasing your car, you must decide whether you will surrender the car or keep it and continue making payments.
You can always choose to surrender your car when you file for bankruptcy, and if you do surrender, you will not be held accountable for the car loan after filing bankruptcy. The same applies if you are leasing. You can get out of the lease.
Keeping a car that you are still paying for is based on whether your payments are current or not. If your payments are current, you have 2 options. You can pay off the car in a “lump sum”, which is purchasing the car at its current value. The other option is to enter into a new contract, a reaffirmation agreement, allowing you to keep the car under the same terms as the car’s original promissory note.
If your payments are not current, you may redeem the car, assuming you have the money to do so. If you do not have the money, you may ask the lender to enter a reaffirmation agreement and incorporate the missed payments into a new payment arrangement. Unless you pay the value of your car, your lender is not obligated to allow you to keep the vehicle.
Reaffirmation Agreement
– To reaffirm your car loan, you should indicate to your lender and/or attorney that you want to enter into an agreement. Most lenders are interested in entering into a reaffirmation agreement.
– Once you have decided upon an agreement with the lender, you will need to file it with the bankruptcy court. A hearing will be scheduled to decide if the agreement makes sense for you.
– If you are represented by an attorney, the attorney can execute the reaffirmation agreement and eliminate the need for you to attend a hearing regarding the agreement.
– If the reaffirmation is approved, you are liabile for any debt related to the car after the bankruptcy. Please be sure to consult with a bankruptcy attorney to understand the obligations your obligations in a reaffirmation agreement. Contact De Novo Law Firm with any questions you may have about bankruptcy at (951) 801-5570.