Rebuild My Car Loan
In a Chapter 7 bankruptcy, you have the right to redeem (repurchase) your car for its current value and there are banks that will give you a loan while you are in bankruptcy so that you can repurchase your car. Another option in a Chapter 7 bankruptcy is to reaffirm your car loan by signing a Reaffirmation Agreement. Both redemption and reaffirmation give you the ability to potentially lower your car loan payments.
Redeem Your Car for Current Value
If you want to redeem your car, you will have to buy it back for the retail value. If the balance on your car loan is significantly higher than the retail value of your vehicle, you should discuss with a San Diego bankruptcy lawyer whether redemption is in your best interests. Redemption loans typically carry a very high interest rate, however if the repurchase amount (retail value of your car) is significantly less than your current loan balance, the payments on your redemption loan can be much lower than your current car loan payments.
Reaffirm Your Car Loan
If you want to reaffirm your car loan, then you will sign a Reaffirmation Agreement after you file bankruptcy. When you reaffirm your car loan you essentially agree to continue to repay your car loan as if you had never filed bankruptcy. Reaffirmation of your car loan is sometimes conversationally referred to as not including your car in your bankruptcy. Technically, you are including your car, but you then agree to reaffirm the terms of your car loan so that you can keep your car. Although not required to do so, many car loan lenders frequently reduce your interest rate, thus lowering your payments, as an incentive for you to sign a Reaffirmation Agreement. Car loan lenders know that if they repossess and sell your car they will receive only auction value so they have an incentive to enter into a Reaffirmation Agreement with you.
Car Leases
Your Chapter 7 redemption and reaffirmation options and your Chapter 13 repayment options, described above, are for car loans. These options are not available for car leases. In a car lease situation, your leasing company is the owner of your car. You simply leased a right to use the car for a stated period on stated terms. If your car is leased and you want to keep it, you will have to make your regular contract payments to your leasing company.
Chapter 13 Repayment Options
In a Chapter 13 bankruptcy, your car loan payments will typically be reduced since your car loan payments can be spread out over five years. If you have less than five years of payments, spreading your payments out over five years will result in reduced payments. Also, if you took out your car loan more than 910 days ago (2 1/2 years ago), you only have to repay the current value (retail value) of your car, and the payments can still be spread out over five years. In most cases, this results in much lower payments.
Free Consultation
Call Bankruptcy Legal Center today to set up a free bankruptcy consultation with a San Diego bankruptcy lawyer to discuss your options for rebuilding your car loan in bankruptcy. We can help you keep your car in bankruptcy, and with more favorable repayment terms, when you file bankruptcy. Call us: (800) 44-DEBTS (800-443-3287).
