Should I Reaffirm My Car Loan?Many debtors face a true dilemma when filing for bankruptcy with a car loan.  Should they or should they not reaffirm their car loan?  Well the fact of the matter is that most people need a vehicle to get to and from work so not paying their car note is just simply not an option. But while in the past, specifically before the 2005 bankruptcy reform, car financers would simply accept payments after bankruptcy and would not repossess as long as they received their payments, now many car financers are demanding that debtors sign reaffirmation agreements that could jeopardize heir fresh financial start.

What you need to know about reaffirmation of a car loan:

  1. The reaffirmation of a car loan makes the debtor personally liable for the debt even after their bankruptcy discharge.  By signing a reaffirmation agreement for their car loan, the debtor is agreeing to pay on their debt as if they never filed bankruptcy and they are agreeing that if they fail to make payments, the creditor can repossess the car and even suit them for payment.
  2. If a debtor does not sign a reaffirmation agreement for their car loan but continues to make payments after bankruptcy and the creditor accepts those payments they are not liable for payment on the debt if the car is repossess.  Even if they eventually default on the loan at a later date, they will not be responsible for the balance of the car loan after the car is repossessed.
  3. Many bankruptcy attorneys and bankruptcy trustees refuse to sign off and approve reaffirmation agreements for car loans because they are usually bad deals for the debtor.  Some bankruptcy trustees have even gone on record saying that car loan reaffirmations in most cases threatened to undermine the debtor’s fresh start.