If you are forced to file for bankruptcy, car loans you may have outstanding become very important. If you default on your loan and lose your car, you'll likely have a difficult time getting to work and doing other necessary daily tasks. You'll also want to recover from bankruptcy by fixing your credit score, among other things.
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Fortunately, since you likely owe more than your car is worth due to depreciation, lenders don't want to take a loss by repossessing your car and will allow you to reaffirm your car loan so you won't lose it. By reaffirming your loan, you won't have to deal with high car loan rates or with taking out bad credit car loans to get a new car. In fact, reaffirming your loan can help to build your credit back up after bankruptcy. If your circumstances have made you file for bankruptcy and you need to keep your vehicle, read on to learn about how to reaffirm after filing.
Reaffirming your loan means that you're agreeing to continue paying it off as normal in exchange for being able to keep your car. Therefore, there's no use reaffirming if you can't continue to make the monthly payments. All this will do is hurt your credit even more. So, the first step in reaffirming your loan is to sit down with a calculator and make sure you can make payments.
Just because you can reaffirm your debt doesn't mean you should. You have no legal obligation to reaffirm a loan after filing bankruptcy, and sometimes it's in your best interest to not do so. The pros of reaffirming are that you won't lose your car and you can start building your credit back up; the cons are that you will have agreed to remain in debt that filing bankruptcy could have erased. A reaffirmation lawyer can help you decide whether you should reaffirm your loan or just give up the car and take advantage of public transportation and a cancelled debt. The latter option looks especially appealing if you currently owe more than the car is worth.
If you've decided to go through with reaffirming your loan, all you have to do is get in contact with your lender and sign a written agreement stating your legal obligation to repay the debt. You then continue making payments as though you'd never filed for bankruptcy.
Failing to make payments on a reaffirmed loan can have serious consequences including loss of property and being sued, so take it seriously and keep careful track of your finances. Reaffirming a loan is never mandatory, but in some cases may be the best thing to do. These 3 steps will help you make sure you have a good reason for reaffirming before you sign the papers.
