Can Ikeep my car ifI filed bankruptcy with an unpaid title loan?

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Can Ikeep my car ifI filed bankruptcy with an unpaid title loan?

It’s a 2007 car that I purchased in 2008 (in full).

Asked on November 24, 2010 under Bankruptcy Law, Wisconsin

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

You have several options here.  First of all you could "reaffirm" your existing car loan. Reaffirming a loan means that if you fail to make payments after your bankruptcy is closed, you remain liable on the loan.  So if your lender repossesses your car, you can be sued for the "deficiency balance"(the difference between your car loan and what it is sold for).  By reaffirming you can also start to re-build your credit since your payments will be reflected on your credit report.  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.  However, you will not receive monthly statements, therefore this does not get reported on your credit report.

The bankruptcy code permits a car owner to reduce the current car balance to the fair market value.  For example, if you owe $17,000 and the car is worth only $13,000, then you may be eligible to reduce the car balance by $4,000 with a new, post-bankruptcy loan.  In bankruptcy this is called, "redemption".  Generally, however,  you must own the car for at least 910 days before filing bankruptcy to qualify for a car redemption loan.  In a redemption situation some companies will work out deals with you and a new lender to refinance your car.

Finally, you could also surrender the vehicle and the dealer could sell it. 

At this point, you really should consult directly with a bankruptcy attorney in your area.


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