Reaffirming a car loan involves committing to a restructured contract. And with reaffirmation, the lender won’t be permitted to repossess the vehicle as long as you’re making payments.
If you enter a Chapter 13 bankruptcy with negative equity in a car that you’ve financed, you may qualify for a loan cramdown if you meet certain requirements.
If a lender sells a repossessed or surrendered car at auction, the selling price may not cover the entire loan balance. If it doesn’t, the amount left over is called a car loan deficiency.
A Chapter 13 bankruptcy involves committing to a repayment plan with your creditors over a three- or a five-year period. That’s a long time, and you may find that you need to finance a vehicle while you are in the middle of the bankruptcy. It’s possible to get approved for an auto loan during a Chapter 13 bankruptcy, but there is a procedure that must be followed.
If you really need to purchase a car before filing for bankruptcy (BK), it might be possible for you to do so. There may even be some advantages that come with buying a vehicle pre-bankruptcy.
For some consumers dealing with serious debt, bankruptcy is a good solution to their problems. However, filing for bankruptcy (Chapter 7 or Chapter 13) isn’t the right move for everyone who is struggling financially.
It is a last resort measure, but Chapter 7 bankruptcy can leave you with a fresh start and an opportunity to rebuild your credit from the ground up.