If I Just Financed a New Car, Can I Still File for Bankruptcy?
These days, most people need a car to get to work, so it would come as no surprise to a bankruptcy court that you financed a new car. Under Title 11 of the United States Code, you can file for bankruptcy at any time. Even though you can file for bankruptcy after financing a new car, the bankruptcy court may have the final say in your keeping the new car.
Other People Are Reading
-
Chapter 7 Discharge
-
If you file for Chapter 7 bankruptcy, your debts will be discharged at the end of your bankruptcy case. Because you just purchased a new car, the creditor who financed the purchase may want you to reaffirm the debt. If you do not reaffirm the debt, the creditor can repossess the car. It is important that you reaffirm the debt, because the bankruptcy court discharges the debt owed to the creditor at the end of the bankruptcy case. The creditor prefers that you sign a contract stating that you still owe money on the car, even after the bankruptcy court declares that you no longer have an obligation to pay for the car.
Reaffirming Debt
-
To reaffirm the debt, you must enter a reaffirmation agreement with the creditor. A reaffirmation agreement states that you will remain liable for the debt and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in your Chapter 7 bankruptcy case. In essence, you promise to pay the debt in exchange for the creditor's promise not to repossess the new car.
-
Reaffirmation Agreement
-
You and the creditor are not the only parties that participate in the reaffirmation agreement. If an attorney represents you in your bankruptcy case, your attorney must sign off on the reaffirmation agreement. Both you and the attorney must declare that you will not be under undue hardship by reaffirming the debt. The bankruptcy court will examine the reaffirmation agreement after it is filed to determine if you and your attorney have satisfied these requirements. If you do not have an attorney, you must appear before the bankruptcy judge at a reaffirmation hearing. At the reaffirmation hearing, the judge will ask questions about your financial situation and your ability to pay for the car before allowing you to reaffirm the debt.
Chapter 13 Plan
-
If you have just financed a car and file for Chapter 13 bankruptcy, you can make arrangements to pay for the car under a debt repayment plan. In a Chapter 13 bankruptcy case, you repay your debts over three or five years within a debt repayment plan, so you will need to propose the repayment of the debt under the plan. The bankruptcy judge has the final decision of whether to confirm the plan.
-
