So you want to keep your car?

Thinking about filing for bankruptcy, but worried that if you do, the “authorities” will leave you without a ride?

For the most part, those fears are unrealistic. The people you see walking home from the courthouse have DUI’s, not bankruptcies.

If you have a car with an outstanding loan (or cars with loans), and you are current on the payments, and you wish to keep the car(s) after you file for bankruptcy (if for no other reason than to get to work, or to look for work), this can usually be arranged.

It may take a little more paperwork than it used to, however. Auto lenders are increasingly insisting on having debtors sign formal reaffirmation agreements to keep their auto loan accounts active. These agreements are essentially binding contracts to pay the loans despite the bankruptcy.

Recent changes in the bankruptcy laws make it more likely that consumer debtors will want to reaffirm their auto loans. Under the current laws, filing the bankruptcy case only protects you from collection activity for 45 days on an auto loan. During that time, you and your attorney will want to iron out the arrangement with the auto lender so you can continue to drive in peace.

Recently, one driver in West Virginia found out the cost of procrastination the hard way; his vehicle was repossessed shortly after the 45 day period expired, because no reaffirmation agreement was in place. Although this sounds draconian (and it is), the case was litigated all the way to the Fourth Circuit court of appeals in Richmond, which sided with the repo man. You can read more about it here.

Although the Fourth Circuit’s opinion isn’t binding in Massachusetts or New Hampshire, drivers here will still want to make sure that all the i’s are dotted when they file their bankruptcy case; once the paperwork is taken care of, then they can use their vechicles without any unneccessary worries.


By Doug Beaton

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