Keeping your car in an Arizona bankruptcy. “Ride-through and Reaffirmation”.
A reaffirmation agreement simply means that you have agreed with your creditor to continue to be liable to them after bankruptcy. You should almost never enter into a reaffirmation agreement with an unsecured creditor. This is because your debt to them will be discharged in Chapter 7, meaning they can never come after you again to collect that debt. However, if you enter into a reaffirmation agreement, and later fail to make payments, the creditor can sue you in court, receive a judgment and even attempt to take your non-exempt property.
More common, in the context of Chapter 7, is that your secured creditors will contact you with offers to “reaffirm” your debt. One of the most common examples of this is with car lenders. If you bought a car from a dealership, chances are that the dealership or your lender is a secured creditor. This means that if you default on your loan by not making your monthly payment your secured creditor can come and take your car and sell it in order to help pay off your debt to them. Furthermore, if you file for bankruptcy you will almost certainly be considered in default by the terms of your contract. This means that if you file bankruptcy, the creditor can “theoretically” come and take your car, even if you have not missed any payments. As a result many creditors will try to scare you with threats that they will repossess your vehicle if you do not reaffirm your debt. What the creditor probably won’t tell you is that if you reaffirm the debt you will continue to be personally liable for the debt. This can harm you later on if you miss a payment and default. For example suppose your car is worth $8000 and your loan value is $12,000. You decide to file bankruptcy and enter into a reaffirmation agreement. However, later on you hit financial difficulties and are unable to make your car payment. As a result your car lender can take your car, sell it for $8000 and then try to come after you for the rest of the $4000. However, certain procedures in bankruptcy may allow you to escape personal liability.
If you are current on your car payment and strictly comply with filing requirements (which your attorney can ensure are done properly) you should be eligible in Tucson bankruptcy for “ride-through”. It is important to note that this benefit is not available in all states. Basically, “ride-through” allows you to file bankruptcy and keep your car, without any risk that the creditor will come and repossess your vehicle as long as you continue to make your car payments. Furthermore, even if you later default and the creditor takes your car they are unable to come after you for any deficiency. As you can see “ride-through” can offer you many benefits in bankruptcy.
Given the “high-stakes” involved in reaffirmation agreements and the “ride-through” procedure it is important to contact a competent Tucson bankruptcy attorney to ensure you are eligible for this benefit.