Can I keep my car if I am financing it at the time I file for Bankruptcy in New Jersey?

A reaffirmation agreement allows a person who files for bankruptcy to keep certain secured debt by removing it from the bankruptcy making it a debt that would not be discharged in the event of default on the loan.  This article specifically addresses the reaffirmations process as it relates to the financing of a car.

By executing a reaffirmation agreement, you will be agreeing to be held liable under the terms of the original contract, including but not limited to the obligation to make payment of unpaid principal, interest, fees and other costs associated with the reaffirmed/assumed debt.****

reaffirmation-agreementIn certain circumstances, you may be required to appear before the court to testify as to your ability and desire to continue making payments on the reaffirmed debt.  The agreement may not be approved by the court.   You are not required by law enter into this agreement and can rescind (cancel) the agreement at any time before the bankruptcy court enters your bankruptcy discharge.

If you enter into this agreement and you default on the reaffirmed debt after the bankruptcy case is completed, the creditor can repossess the car and sue you for any deficiency.   If you do not enter into this agreement, your property may be repossessed and that debt would be discharged in bankruptcy.

Some creditors will allow you to retain possession of your property even if you do not enter into the agreement as long as you continue to make payments (this is referred to as a “pay and drive” option).  When the Bankruptcy Law changed it removed the “pay and drive” option from the law and in its place required car owners who file bankruptcy to enter into a reaffirmation agreement.  Even companies that have allowed car owners to pay and drive after filing bankruptcy there is no guarantee its policy will not be changed after the case is closed.  If you do not enter into the agreement and and you maintain the collateral and continue to make payments, the lender may not report post-bankruptcy payments to the credit reporting agencies.  If you do not enter into this agreement, you may not receive account statements and may not be able to make automatic payments on the account.


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