Chapter 7 Bankruptcy - Will I Lose My Car? (Reaffirmation) | Summary and Q&A

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November 5, 2020
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Consumer Warrior
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Chapter 7 Bankruptcy - Will I Lose My Car? (Reaffirmation)

TL;DR

In Chapter Seven bankruptcy, you can generally keep your car as long as you continue making the payments, and if the car's value does not exceed the exemption limit set by your state. Reaffirmation agreements are optional and come with advantages and disadvantages.

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Key Insights

  • 😨 Chapter Seven bankruptcy allows you to keep your car if you continue making payments and its value doesn't exceed the exemption limit.
  • 🧑‍🤝‍🧑 Exemption limits vary by state and can be doubled for married couples.
  • 👻 Surrendering a vehicle through bankruptcy releases you from any remaining balance owed.
  • 👍 Reaffirmation agreements require court approval, and if approved, the lender will report on-time payments to credit agencies.
  • 💳 Non-approved reaffirmation agreements may result in no credit reporting but protect you from liability if you surrender the car later.
  • 💳 Reaffirmation agreements are generally not advised due to potential liability and limited credit benefits.

Transcript

  • Hey everybody, John Skiba here, and in this video, I'm going to talk about whether you can keep your car if you're going through the bankruptcy process, and I'm even going to explain how the reaffirmation process works. But if this is your first time here to my YouTube channel, go ahead and click subscribe, check on the little bell, That way, you... Read More

Questions & Answers

Q: Can I keep my car if I file for Chapter Seven bankruptcy?

Yes, you can generally keep your car if you continue making the payments and its value does not exceed the exemption limit set by your state.

Q: What happens if my car's value exceeds the exemption limit?

If your car's value exceeds the exemption limit, the court may take it, pay off the loan, give you the exemption limit amount, and distribute the remaining funds to your creditors.

Q: What are reaffirmation agreements?

Reaffirmation agreements are optional contracts signed during bankruptcy to keep a vehicle and continue making payments. They require court approval and come with advantages (credit reporting) and disadvantages (potential liability if you later default).

Q: Should I sign a reaffirmation agreement?

It is usually not recommended to sign a reaffirmation agreement. With the court's non-approval, you can still keep the car by making payments, and you won't be liable for any remaining balance if you eventually let it go.

Summary & Key Takeaways

  • In Chapter Seven bankruptcy, unsecured debts are eliminated, while secured debts, like car loans, are treated differently. You can keep your car if you continue making payments and if its value does not exceed the exemption limit set by your state.

  • The value of your car and the equity you have in it (value minus loan balance) determines whether you can keep it. If your equity is within the exemption limit, you can keep the vehicle.

  • If you want to surrender your vehicle due to unaffordable payments, bankruptcy allows you to do so without owing any remaining balance.

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