If you file for a Chapter 7 bankruptcy, you may be concerned about how it will affect your ability to keep your car. If you have pledged your vehicle as a security for debt, or if you are financing or leasing a vehicle, then you have several options when it comes to filing for bankruptcy.

First, you have the opportunity to reaffirm your debts to the car company. If you do this, you are telling your creditor that you agree to pay the balance that is owed on your car note even though you have already filed for bankruptcy. After reaffirming the debt, you are required to make payments on the debt consistently. If you fail to make car payments then the car lender can repossess your car on the basis of a deficient balance.

If your car is repossessed, it will be sold at an auto auction and this money will be used to repay your loan. Therefore, it is important to know that you can fully repay your car loan before you choose to reaffirm the debt. Reaffirmation agreements are always voluntary, so you will not be compelled to make one of these agreements if you believe that you may be unable to cover those costs in the future.

Another option you have during bankruptcy is to redeem your vehicle. This means that you can purchase your vehicle from a creditor by making a lump sum payment that is equal to the car's fair market value. The U.S. Bankruptcy Code provides that you must pay the creditor the replacement retail cost of the car, and the balance of the debt will be discharged.

This can be a great benefit for someone who has a vehicle that has severely depreciated in value. You can also choose to surrender your vehicle if you cannot afford the monthly payments. This can allow you to discharge the cost of your vehicle easily and avoid a messy dispute over the car. This is often the best choice if you are strapped for cash and don't know how you could afford to make payments on your vehicle.

If you are leasing a car, you can continue making your monthly lease payments or choose to surrender the car back to the creditor. If you surrender the leased car, any obligation to repay the debt will be eliminated. It is up to you to decide whether it is worth it to struggle for the car payments each month or if it would be better to surrender the vehicle and possibly downsize to something a little bit smaller. If you want more information about cars and bankruptcy, don't hesitate to call the firm today. With the right lawyer on your side, you may be able to determine how to proceed effectively with your bankruptcy plan.