In a Chapter 7 bankruptcy, you have the right to redeem (repurchase) vehicles for their current market value. If you need the money to make the purchase, there are banks that will give you a loan while you are in bankruptcy so that you can repurchase your vehicle. Another option in a Chapter 7 bankruptcy is to reaffirm a car or truck loan by signing a Reaffirmation Agreement. Both redemption and reaffirmation give you the ability to potentially lower your monthly payments.
If you want to redeem a car or truck, you will have to buy it back for the retail value, which is the price that a dealer would sell the vehicle for. That value is slightly higher than the private party value that you would expect to pay to an individual. If the balance on the loan is significantly higher than the retail value of the 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) is significantly less than your current loan balance, the payments on your redemption loan can be much lower than your current car loan payments.
If you want to reaffirm a car or truck loan, then you will sign a Reaffirmation Agreement after you file bankruptcy. When you reaffirm a vehicle loan you essentially agree to continue to repay the loan according to its existing terms, as if you had never filed for bankruptcy. Reaffirmation is sometimes conversationally referred to as not including your car or truck in your bankruptcy. Technically, you are including your vehicle in your bankruptcy (you disclose your ownership interest), but you then agree to reaffirm the terms of the loan so that you can keep the vehicle. Although theoretically your lender could voluntarily lower your interest as an incentive for you to sign a Reaffirmation Agreement, in practice they rarely or never do. Despite the fact that if they repossess and sell your vehicle they will receive only auction value which is less than would you would your lender in a reaffirmation with a reduced rate, most lenders have a firm policy that they will not lower your rate.
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. You simply leased a right to use the car for a stated period on stated terms. If your truck or car is leased and you want to keep it, you will have to make your regular contract payments to your leasing company.
In a Chapter 13 bankruptcy, vehicle loan payments will typically be reduced since your truck or 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 truck or car loan more than 910 days ago (2 1/2 years ago), you only have to repay the current value (retail value) and the payments can still be spread out over five years. In most cases, this results in much lower payments.
Call Bankruptcy Legal Center today to set up a free consultation with a San Diego bankruptcy lawyer to discuss your options for rebuilding your truck or car loan in bankruptcy. We can help you keep a car in bankruptcy, and with more favorable repayment terms, when you file bankruptcy.