Automobile Loans and Chapter 7

The common question is “Will I lose my car?” It is certainly a  reasonable concern.
This guide goes over the three (3) legal options  plus two (2) alternatives.

Reaffirm the Debt

Essentially,  you agree that the debt goes on after the bankruptcy with the same contract terms. The finance company retains its lien, and you will be personally liable for the debt. The main requirement is that you are current or close to current on your payments. Generally, the finance company wants proof of Physical Damage  Insurance. Remember, the finance company wants your money, not your car. There is a disadvantage to reaffirming a debt. If, after the Bankruptcy is over, you fall behind on the payment the finance company can repossess the car and hold you liable for any deficiency. This is the same as before a bankruptcy. Similarly, if you have an accident, the insurance company pays the value of the car and you are liable for the rest.


Some folks decide the car is not worth keeping and paying for it. This is a great option if you come to that decision. Most cars are worth much less than the balance owed on the loan. You will get a discharge of the debt: you owe nothing.


If your car is worth less than what’s owed, you can save money by paying the retail value of the car and discharging the rest of the debt. Assume you owe $17,000 and the car is only worth $8,000, you can redeem by paying $8,000.

Redemption, Part II

You usually have just a month or two to come up with the $8,000 so redemption by itself is often not a realistic option. There are a few companies that finance the redemption. This allows you to come out of bankruptcy with lower payments. Will you qualify? That is up to the redemption financing companies. But there is no harm in applying to them.

Redemption, Part III

How does one come up with the money to redeem a car? We often refer our clients to a company that finances the redemption. Although acceptance is up to them they advise that are three (3) requirements.

  1. No more than 2 repossessions shown on your credit report.
  2. No more than 2 bankruptcies in recent years.
  3. The vehicle has under 150,000 miles and is less than 10 years old.

As an alternative to redemption and if you qualify this company can provide you with a replacement and more affordable car.You can apply over the phone for Complimentary legal advice, and find out if you qualify right away.

The lawyers at Robert J Adams & Associates will take care of the rest.

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