Life After Bankruptcy

Can I Keep my Car After Bankruptcy?

Like many Americans, you probably need your car. You need your car to get to work, to run errands, to take your kids to school, or to go to the doctor. Because our cars are so important to our every day lives, you may not be able to give up your car. So how do you keep your car after bankruptcy?

How to Keep your Car after Bankruptcy

The tool you may be able to use here is called Debt Reaffirmation. To reaffirm a debt in bankruptcy means that you exclude the debt from your bankruptcy, and agree to pay off the debt after you file. So you’re essentially just keeping that one debt, separating it from your bankruptcy process. You may not need to take this step – in some instances, if you are current on your car payments and keep making them, then you may just be able to keep making payments as usual and keep the car. Your attorney can advise you on what you need to do.

Debt reaffirmation isn’t used all the frequently – some attorneys may say you should never reaffirm a debt. But a car is typically the one situation where it may be advised, simply because cars are so important.

Should I Reaffirm my Car?

Now you know that you may be able to, but should you keep your car after bankruptcy? That is also a good question to ask, because you have alternatives to consider. This is one of those questions that your attorney is going to help with – everyone has a different situation, and every car is different. Given the condition of your car, how you use it, and the condition of your car loan, your attorney will be able to advise you on your best choice.

One option to consider is giving up your car and replacing it after bankruptcy. This can be attractive in particular if you have an expensive car that you owe a lot of money on. If you can give up an expensive car and replace it with a less expensive car, you will be more able to afford the payments. Ask yourself – can you really afford your expensive car? Is it a smart way to be spending your money after your bankruptcy?

Another option may be to buy a used car without a loan. After your bankruptcy, if you can save up a little money each month, you could eventually buy a used car outright and eliminate a car loan from your monthly expenses. Also keep in mind the expenses for maintenance and repairs – you are looking to reduce expenses, so don’t buy a car that needs expensive parts.

Or, better yet, can you get rid of your car altogether? This is definitely not an option for some of us, but if you live in a city with good public transportation, you may not need a car. Your car is one of your biggest monthly expenses, and eliminating it may be a great step towards a more stable financial picture after bankruptcy.