Filing bankrupcty
Question Details: I like in South Dakota and was wondering if I can file bankruptcy on a car that I have a cosigner on? I lost my job and I can not afford the $425 payment each month. The cosigner is my Grandmother and she can't afford it either. What can I do?
A debtor has 3 options available regarding a car loan after filing for a Chapter 7 bankruptcy: 1. Surrender the vehicle. Contact the lender and say that you want to turn in the car. Once you surrender the vehicle, the lender will sell it, usually for less than the amount you owe. The remaining balance, called the "deficiency balance," should be eliminated in your bankruptcy. Note: Your co-signer, would however, still be liable for any deficiency. 2. Reaffirm your current car loan. Most lenders will give you the choice to reaffirm your current car loan or surrender the vehicle. Reaffirming a loan means that if you fail to make payments after your bankruptcy is closed, and the lender repossesses the vehicle, you can be sued for the deficiency balance. However, to keep receiving statements and balance updates, lenders require you to reaffirm the debt. Note: You co-signer will remain liable as well. Additionally, in some cases however, when the car balance is very low, you can keep the vehicle, continue making payments and not have to reaffirm the loan. You will not receive monthly statements, so it will be up to you to call the lender and determine when the balance is paid off. 3. Redeem your car loan with a new lender. Bankruptcy law permits a car owner to reduce the current car balance to the fair market value. For example, if you owe $15,000 and the car is worth only $10,000, then you may be eligible to reduce the car balance by $5,000 with a new, post-bankruptcy loan. The code section is 722, "Redemption". However, the current understanding in the bankruptcy community is that you must own the car for at least 910 days before filing bankruptcy to qualify for a car redemption loan. Note: Some large car loan redemption companies will work out deals with you and a new lender to refinance your car post-bankruptcy. The 910-day rule is not regularly enforced by the some original car lenders. Additionally, if a new loan is obtained, you co-signer is released from liability. These are the options available to you. At this point, you really should consult with a bankruptcy attorney in your area.
