Can I surrender my car or vehicle during bankruptcy without being liable for the deficiency or further attorney’s fees or costs?
When you file bankruptcy, most of your unsecured debt will go away if the court grants a discharge. Unsecured debt includes your credit cards or personal loans that are not attached to any property. On the other hand, secured debts are treated differently. Secured debts includes debts that are attached to your car or home. With respect to your financed car, there are a number of options.
Options for your car or vehicle if you still owe money
When you file bankruptcy, if you still owe money on your car, you have an option to keep or surrender it in most cases. If you keep intend to keep your car, there are further decisions that you need to make. These options are explained below.
Surrender your vehicle
When you file your bankruptcy petition, you will need to state your intentions with regards to your car if it is secured by a loan. This is called the statement of intentions. It needs to be filed with the court. If you intend to surrender it, rather than reaffirm the vehicle, then you will eventually need to make arrangements to give it up. You should continue to insure the vehicle until it is no longer in your hands. If you receive a discharge of your debt, you will not be liable for any deficiencies, costs or attorneys fees related to the vehicle. Debtors choose to surrender their vehicle in bankruptcy for many reasons such as, the payment was too high, the interest was too high, the car was worth less than the amount owed etc.
Reaffirm the Debt
OPTION 1) Sign the agreement: If you sign the agreement, you can keep the car. However, you stay legally liable for the debt. This means that should you fall behind on payments, the creditor can repossess the vehicle. More importantly, you will be liable for any deficiency on the loan.
Additionally, even if you sign the agreement the judge might deny it because they don’t believe that it is in your best interest. If the Judge denies it, than you are in the same boat as option two below.
Also, if you sign the agreement, you might need to show up to the reaffirmation hearing. However, it is pretty straight forward, the judge will simply ask questions to determine whether you can afford the vehicle.
OPTION 2) Don’t sign the agreement: If you do not sign the agreement, most creditors will still allow you to keep the car as long as you continue to make the payments.