Keeping Your House & Car

Keep Your House and Car Generally speaking, so long as you continue to make payments and maintain insurance on your home or vehicle, you will not lose either asset simply by filing either a Chapter 7 or 13 Bankruptcy. In Chapter 7, creditors usually request a "reaffirmation agreement" which is basically a new contract affirming the old contract. This must be signed by you and the creditor, and then either approved by the bankruptcy judge or your attorney. We generally frown against these since it legally puts you back on the hook for this debt, and should something happen in the future, you would still remain liable on the account.

In most situations, we recommending rejecting the "reaffirmation agreement" and "riding through" the bankruptcy maintaining payments and insurance. So long as you are current on the payments and insurance, there is no reason for a creditor to take the house or car back. Moreover, under the new bankruptcy laws, it is illegal for a home creditor to attempt any foreclosure for failing to reaffirm a debt.

By not signing the "reaffirmation agreement" you have the best of both worlds. So long as you maintain payments and insurance, the vehicle and home are yours. Once paid off, title goes into your name. But you can always walk away from the asset for any reason in the future should something happen and buy a new home or car. For example, if the debt is not reaffirmed, and 2 years later you crash the car or for some other reason just decide you no longer want it, simply call the creditor and they will pick it up. Their only recourse is against the vehicle, not you personally, even though you owe more than what it is worth. This is because the Bankruptcy already wiped out your personal liability and the only thing that remains is the lien.

With some car creditors, it may be advisable to execute a reaffirmation agreement. In limited situations in dealing with credit unions and certain creditors, it may be wise to reaffirm the debt depending upon the circumstances. We deal with these creditors on a case by case basis depending upon your situation. We are presently in appeal on this very issue and hope to take it all the way to the United States Supreme Court. In a certain case, Ford repossessed a vehicle when the client was totally current. Under the old laws, this was clearly ILLEGAL. But Ford believes this changed under the new laws and we entirely disagree. This is a landmark case we are litigating and we are the only Law Firm in the United States presently taking this matter up on appeal. As soon as we get our decision, it may very well change how creditors like Ford behave throughout the United States.