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Should I reaffirm the loan on my car?

From the moment you began to consider filing a Chapter 7 bankruptcy in Ohio, you have had reservations because you worry about losing your transportation. Right now, you have a nice car, although you do have a loan and payment. The vehicle is not eligible as an exemption, though, and if it is liquidated, you may not be able to get another one as reliable without a high interest rate. Fortunately, you may be able to keep the car - as long as you are willing and able to keep making the payments.

According to, your lender may be willing to reaffirm your loan. If so, you must file a reaffirmation contract with the bankruptcy court, then continue making your payments until the car is paid off. Evaluate your budget carefully before signing the reaffirmation agreement, though. If you default on the loan, the lender can repossess the car, sell it, and charge you for the balance you still owe. This could lead to wage garnishment or a lawsuit, and you will have another negative mark on your credit report in addition to the bankruptcy.

On the other hand, if you have a low interest rate on the loan, or the amount you owe on the loan is less than you would need to purchase another vehicle, it might make sense to reaffirm. Not only that, making the payments on time and paying the loan off will be a positive mark on your credit report and help you in re-establishing your credit.

Although this information may help you understand some of what is involved in reaffirming a vehicle loan, it may not be relevant to the circumstances of your case. Therefore, it should not be interpreted as legal advice.

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