Filing for bankruptcy isn’t a fun situation to go through. A lot may be on your mind during the process of going through either a Chapter 7 or Chapter 13 bankruptcy, and you may be worrying about your car and auto loan(s). The good news is that there are different options to choose from when it comes to your car, but the one that’s right for you depends on your situation.

Options for Your Car During Bankruptcy

mad in the carSurrender your car – Turn in your vehicle directly to the lender. This is slightly better than having your car repossessed, but make sure you have written proof of the surrender. Once you surrender the car, the lender will sell it at auction to recover at least part of the loan balance.

Reaffirm your current loan – Most lenders offer the option to reaffirm a car loan. You must sign a court-approved reaffirmation agreement stating that you agree to repay all (or a portion) of the debt. Depending on the lender, they can consider not signing the document a breach of your loan agreement and will repossess your vehicle.

Keep your car – Other lenders will allow you to keep your car without a reaffirmation agreement. It then becomes your responsibility to keep up with your current payments and, since most will no longer send you a monthly statement, you’ll need to contact the lender to see when the balance is paid off.

Redeem your car – Bankruptcy allows you to reduce your current loan balance to your car’s actual value, although this generally only happens if it was purchased just before you filed. Doing this requires court approval and finding a new lender. In addition, very few lenders offer this type of loan and your current lender has to agree on your car’s value. If you and your current lender can’t come to an agreement, you’ll have to wait for the judge to decide.

Negotiate directly – You can also negotiate with the lender. Some lenders – but not all – are willing to lower the loan balance to the vehicle’s fair market value. Credit unions are the lenders most likely to do this.

Keep in mind that unless you plan on surrendering your vehicle, you have to remain current on your car payments both before and after you file for bankruptcy.

Making the Right Choice

Going through bankruptcy is a challenge on its own. Making the right choice for your auto loan is an added stress. If your bankruptcy is complete and you’re ready to take the next step, but are worried about your credit situation getting in the way, let Auto Credit Express help.

We work with a nationwide network of special finance dealers who have subprime lenders available to help people with many credit challenges, including bankruptcy. It’s simple to get the process started. Just fill out our no-obligation online auto loan request form today.