Monthly Archives: October 2021

Do I have to keep paying my car loan after I file for bankruptcy?

Only if you want to keep the car. If you stop paying for it, they will repossess it.

When you file a chapter 7 case, you check a box on your paperwork that says “reaffirm” or “surrender.” If you reaffirm the debt, you keep making payments with the same balance, terms, and payment (see below). If you surrender, then you stop making payments and let them repossess the car (but since you filed bk first, they cannot report it as a repossession on your credit, and they cannot sue you for the difference).

When you file a chapter 13, if you want to keep it, then you can either keep paying for your directly (outside of your chapter 13 plan), or you can propose to pay for it monthly as part of your chapter 13 plan. Either way, you keep paying for it. If you want to surrender it, then stop making payments.

So if you want to keep something that you financed, then you need to keep paying for it.

Every now and then I have a client ask me if the bk wiped out their car loan. They are asking because they sincerely believe that the bk would wipe out the loan and let them keep the car free and clear. It doesn’t work this way. Bk discharges your personal liability for the loan, BUT the loan is still attached to the collateral. If you want to keep the collateral (like the car), then you have to keep paying for it.

If you stop paying, they cannot sue you on the loan, which was discharged, but they can definitely repossess the collateral (your car or truck).