If you decide to reaffirm your car debt in bankruptcy, it's in a seven-step process.
- First, you have to tell the Bankruptcy Court that you want to reaffirm the debt. You do that by selecting the “reaffirmation” box for your debt on the Statement of Intention bankruptcy form. Upsolve will help you prepare this form.
- After filing your bankruptcy forms, you must mail the Statement of Intention form to your car lender. You should also call your lender and speak with the bankruptcy department. Ask them to send you a reaffirmation agreement.
- Normally, your lender will send you the reaffirmation agreement within a few days.
- You must sign and deliver your reaffirmation agreement to the lender within 45 days after your Meeting of Creditors.
- The lender will then file the signed reaffirmation agreement with the court.
- The bankruptcy court will hold a brief hearing to make sure that reaffirming is in your best interest. You will need to attend.
- If the judge approves your reaffirmation, you will get a notice of reaffirmation along with your discharge. And you will be able to keep the property as long as you stay current on your payments.
If you don't reaffirm the debt, then the car can legally be repossessed after the 45 days end even during bankruptcy (although there may be some state law protections in your state). Although many lenders do not actually require reaffirmation agreements, some lenders, like Ford Motor Credit, definitely do and will repossess the car absent a reaffirmation. Either way, you must understand that reaffirming the debt reinstates your personal liability for that debt. That means if you fall behind on your car payments after filing for bankruptcy, the lender can, and probably will, repossess the car. And after the repossession, the lender could sue you and get a judgment against you, hindering your ability to get a fresh financial start after bankruptcy.