I DON’T WANT TO INCLUDE MY CAR IN MY BANKRUPTCY

Whether I am in my office in Willingboro New Jersey or in Northeast Philadelphia I often hear the same statement when a client comes in to file a Chapter 7 bankruptcy- “I don’t want to include my car in the bankruptcy “.  While keeping a car is generally not a problem, the car is required to be included in the bankruptcy since  a debtor is required to list everything owned and all debts, including car loans. However, in addition to listing the car, a Statement of Intentions regarding the car must also be filed. In it the debtor states whether they intend to surrender the vehicle, reaffirm the debt on the vehicle, or redeem the vehicle. Reaffirm means a form is completed and filed with the court which has the effect of taking the car out of the bankruptcy. The good part is it helps rebuild credit. The bad part is if you default and the car is repossessed you will be liable for any deficiency claim. Redemption is when you have a car worth, for example, $10,000.00 and you owe $15,000 there are companies that will lend you the $10,000 and you are basically saying if I gave you the car back you would only get $10,000 even though I owe you $15,000 so I am giving you $10,000 and that is what you get. The bottom line is keeping your car in a bankruptcy is generally not a problem.