Should I Reaffirm My Automobile Debt In Chapter 7?

Bankruptcy can disrupt your life. It can bring about changes that you  never planned on. And for many people who live outside major cities  with excellent public transportation options, a car is their connection  to food and work. Giving up your car in a bankruptcy can be a difficult  decision, but you do have choices. As a top bankruptcy and Chapter 7  attorney firm, Robert J. Adams & Associates has been down this road  many times with clients and we will advise you about all your choices,  to ensure that your Chapter 7 goes smoothly and causes you the least  amount of inconvenience possible.

Individuals who file Chapter 7 bankruptcy frequently have a car note. They often ask “What do I do about my car?”

When there is Chicago automobile debt in Chapter 7,  some clients want to keep their car and continue to pay the car note.  Some find the car and the car note to be a burden and desire to return  the car.

Keeping the car or returning it is always your choice when you have Chicago automobile debt in Chapter 7. This is why every one of my Chapter 7 clients with a car note receives the following letter:

If you have Chicago automobile debt in Chapter 7, and possess a car note, I hope this helps you.


Dear Mr./Ms./Mr./Mrs. ( ______________ ),

You are receiving this letter because you have a car note.

When you have an automobile that is being financed, upon filing a Chapter 7, you have the following options:

  1. Reaffirm the debt;
  2. Surrender the car and owe nothing;
  3. Redeem the car for its retail value; or
  4. Do nothing and continued to pay the car note.


A  reaffirmation agreement is between you and the company financing your  car. Generally, the financing company will only agree to a reaffirmation  if you are current on your car note and have physical damage insurance.

When  you sign a ‘reaffirmation agreement’ you agree to be responsible for  the debt despite having filed for bankruptcy. This means that if you  default on the car note the finance company can repossess your car and  sue you for a deficiency balance after they sell the vehicle.


You  have the option of ‘surrendering’ the car and you will then be  discharged of the debt. Some car dealers will even sell you another car,  possibly with better terms.


You  have the option to ‘redeem’ the car for its retail value, meaning if  the balance of the car note greatly exceeds the car’s value you can  ‘buy’ the car for its value. Regarding Chicago automobile debt in Chapter 7,  rarely will an individual have the resources to redeem their car. You  may find a company that will finance your redemption, and even though  their interest rates are often high, it may still be a better deal for  you. If you have Chicago automobile debt in Chapter 7, talk to your bankruptcy attorney about redemption and all your options.


If  you want to keep your car, you should be advised that this is not  recommended because the finance company can still repossess your car  after bankruptcy—even if you are current on your payments.

When  you agree to reaffirm your car debt we must certify that the  reaffirmation will not create an undue hardship for you. We can only  certify a reaffirmation if the Income and Budget schedules filed in your  case have sufficient income to pay the creditor after the discharge.

When  it comes to replacing your car or financing a redemption, all dealings  are between you and the company. We can refer you to companies offering  these services but we have no influence on their decision making  process.

Also, if you enter into a  reaffirmation agreement but later change your mind, can you reject it?  The answer is yes but only for a limited time, the latter of either  below, as follows:

  1. 60 days after the reaffirmation is filed with the court; or
  2. The date the Bankruptcy Court issues a discharge in your case

When  you’re facing bankruptcy, it’s never easy emotionally. Bankruptcy  naturally causes a lot of anxiety because no one ever expected to be  ‘here’ and suddenly they are, filing for bankruptcy. It can make you  feel like your life has gone off track, but bankruptcy is actually a  great option for many who are suffering needlessly from the daily  anxiety and stress of creditors calling, harassing them, and demanding  payments. If you look at it in a positive light, consider bankruptcy as  an opportunity to start fresh, to begin your life again with a clean  slate, moving forward into a great, new real chapter in your life, after  your Chapter 7.

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