Should I Be Reaffirming On My Car If I’m Upside Down?

When you file for chapter 7 bankruptcy and you have a secured vehicle, you have three choices which you can make. You can either reaffirm on the debt, you can redeem on the debt or you can surrender the property in full satisfaction of the debt. If you decide to reaffirm the debt on your vehicle, then you are basically agreeing to be bound by the terms of the agreement going forward. This means that if you fall behind on that vehicle in the future, the lender can repossessed the vehicle, sell it at auction, and come after you for the deficiency even though you filed the chapter 7 bankruptcy. Thus, you want to make certain that if you reaffirm your vehicle debt, that you are making a wise decision.

If your vehicle is worth much less than it’s worth, then you might be better not reaffirming on that vehicle debt. Under chapter 7 bankruptcy, this is your opportunity to surrender the vehicle back to the lender and get out of the debt in full. When you decide to keep the vehicle and reaffirm the debt, you are basically agreeing to be bound by that debt once again. So, you are taking something that could’ve been discharged in a bankruptcy and now you are putting yourself back on the hook for that debt. If you have some equity in the vehicle or breaking even in that it’s worth as much as you owe, then reaffirming the debt may not be a bad idea. After all, you probably need a vehicle to get to work or to take care of yourself and your family. It is possible to get a vehicle after filing bankruptcy, however, the interest rate might be higher than usual. If you are close in terms of equity and you are not too far upside down, then I would recommend that you reaffirm the debt on your vehicle. If, on the other hand, you are extremely upside down on your vehicle, then I would strongly suggest that you surrender the vehicle in exchange for getting out of the debt completely.

You may want to check what the value of your vehicle is by taking it to Carmax or some other dealership to evaluate. You may be able to negotiate with your lender for a lower reaffirmation amount. Your attorney should be able to help you and guide you in this decision-making process. However, ultimately it is you that needs to make that decision on whether you should reaffirm the debt on a vehicle or surrender the vehicle in exchange for a complete elimination of that debt.

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