Vehicles in Chapter 7 bankruptcy can be handled in many different ways according to Libertyville bankruptcy attorney. The most common way is to reaffirm the debt on the vehicle. By reaffirming the debt on the vehicle, you are agreeing to be bound by the terms of the contract once again or any new contract that’s involved in the reaffirmation agreement going forward. What this means is that if something were to happen to that vehicle or your ability to make payments down the road, the vehicle could be repossessed and you can be liable for the deficiency. That is, if you decide to re-affirm the debt on the vehicle.
You also have the ability to surrender the item in complete satisfaction of the debt. By surrendering the items back to the auto finance company, you are no longer responsible for any payments or any debt on that property. That means even if it sells in auction and there’s a huge deficiency, the finance company has to eat the deficiency and they cannot seek any amount from you.
Another option with regard to a vehicle, although seldom used, is to redeem the property. When you redeem the property, you are making a one-time payment for the fair market value of the property. When it comes to autos, you are looking at a pretty high price for redemption. That explains why there are separate companies that will do the redemption funding for you. If you go into court and get an order redeeming the property for a certain amount and you have a lender already ready to give you that money and take over the new loan, then a redemption will be successful. In my opinion, the typical route is to either reaffirm the debt or to surrender the debt. When you redeem the debt, you are basically taking out a new lender with additional fees and additional interest.
The great thing about Chapter 7 is that you have within your power the ability to keep a vehicle and pay for it or surrender the vehicle and get out of the debt. It is a very unique situation where all of the control is in your hands as the debtor.