Can I Keep my car if I File Chapter 7 Bankruptcy in Georgia?

Due to the lack of comprehensive public transportation and the distance between the suburbs and the city in the Atlanta metro area, many Atlanta residents who file bankruptcy are concerned about keeping their cars after filing bankruptcy under Chapter 7 so that they can continue to work.

The good news is that you can keep your car if you file Chapter 7 bankruptcy. If you own a car and file Chapter 7 bankruptcy you have three possible options regarding your car: (1) you can surrender the car; (2) you can reaffirm the loan; or, (3) under certain circumstances, you can redeem the vehicle. These options are available for debtors who still have loans on their cars. Debtors who own their cars free and clear may keep their cars, as long as the cars are not worth more than the exemption for vehicles in Georgia.

Surrendering the vehicle in bankruptcy is a relatively straightforward process. You return the vehicle to the creditor, and your obligation on the loan ends, along with your ownership of the car. You may allow the creditor to pick the car up at your home or make arrangements to drop the vehicle off at the nearest location for that creditor.

The first option for keeping the car is to reaffirm the loan. So, what does “reaffirm the loan” mean exactly? When you reaffirm your auto loan, it means that you sign a new agreement declaring that you will pay the entire amount remaining on the car, plus interest, under the same terms to which you agreed under the original loan. Generally, the agreement will state the amount of money that is still due on the loan, the interest rate, a statement of income and expenses that show you can afford payments, a description of the collateral (car), the monthly payment amount, an affirmation that you can afford to make the payment, and your signed reaffirmation of responsibility for the debt. The bankruptcy court will then allow you to keep the vehicle.

The key consideration to keep in mind before you reaffirm a car loan is whether or not you will be able to make your payments. If you believe that you will not be able to make your payments you should not reaffirm the loan. The reason for this is that if you are not able to make your payments and you sign the reaffirmation agreement, you are still liable for the amount remaining on the loan, even though the car loan was listed in the bankruptcy petition. If you reaffirm, bankruptcy protection will not cover the vehicle if you should fall behind on your payments. Thus, the car creditor can repossess the car and sue you for the deficiency balance upon default.

Redemption is another option for vehicle owners who file bankruptcy under Chapter 7. In a redemption, the debtor gets a court order allowing him/her to redeem the vehicle for a lump sum, usually the fair market value of the collateral. This is not a guarantee. The bankruptcy court has to approve it, and the creditor can object and stop the redemption. It is, however, a good option if the value of the vehicle has depreciated and the fair market value is significantly less than the amount left on the loan. Redemption can be used on other types of secured loans in addition to auto loans.

If you are considering filing for bankruptcy please consult a qualified attorney. For a free consultation please contact the Law Offices of Charles Clapp at (404) 585-0040 or email for more information.