I’m Behind On My Car Payments; What Are My Options in Chapter 7?

If you are not current on your car payments, your options will depend greatly on the type of bankruptcy you choose. If Chapter 7 bankruptcy is right for you, because you have mostly unsecured debt or would like to complete the process quickly, you may be wondering whether you have to surrender your car in the process.
It is possible to lose your car in Chapter 7, so it is important to work with an experienced bankruptcy attorney in your area. Your attorney will discuss your options regarding your vehicle, which will include:
Surrendering Your Vehicle
You can always surrender your car in bankruptcy, and will have any existing debt discharged. This is a great option for many people, but most people are not interesting in losing their vehicle.
Keeping Your Car
If you are behind on your payments, you will have a lot more options in bankruptcy if you can find a way to get current as quickly as possible prior to filing for bankruptcy. If you can, you can redeem or reaffirm your car debt.
You have the option in Chapter 7 of redeeming your car. This means that you pay the lender a lump sum for what the car is currently worth, and become the full owner of the vehicle without any obligations to the lender. Most people in bankruptcy cannot afford this without a loan, which puts them back in a position of lending, and often at a higher rate.
You may be able to keep your car if you reaffirm your debt. While this sounds like an agreement to continue your old contract with your lender, in reality it is completely new. The agreement may or may not contain similar terms as your old agreement, but you are not under any obligation to enter into the agreement. Reaffirmation agreements can be problematic because they require surrendering the fresh start that bankruptcy provides.