Filing a Chapter 7 bankruptcy in Atlanta will help you save your car under limited circumstances, but it is possible. You see, a debtor in Chapter 7 only has three options when it comes to deciding what do to with their personal property covered by a lien. When you and your Atlanta bankruptcy lawyer figure out what will be the best option for you and your family, your attorney will file a “Statement of Intention” with the bankruptcy court to let the world know what your intentions are with regard to your secured collateral.
1. Surrender: The first option is to surrender the property to the car lender in full satisfaction of the debt. The car lender can never come after you for the deficiency balance on your car note, which is a fancy way of saying the difference between what the car sold at auction and what you owe on the note. For instance, if you owe $10,000 on a car that gets repossessed, and the lender can only get $6,000 for it at auction, the car lender can sue you for the remaining $4,000 on the note. Because a Chapter 7 bankruptcy wipes out your personal liability on your debts, your lender will never be able to come after you for the deficiency.
2. Reaffirmation: One of the ways to keep your car through a Chapter 7 bankruptcy is to reaffirm the underlying note. A reaffirmation agreement is a voluntary agreement between the debtor and the creditor essentially providing that the underlying note will not be discharged in bankruptcy. In other words, if you enter into a reaffirmation agreement with your car lender and fail to make payments 3 months after you receive your discharge, the creditor will still be able to sue you for the difference between what you owe and what the car sells for because you agreed that the debt would survive bankruptcy. I rarely advise clients to reaffirm car notes if they are current because lenders do not want to go through the trouble of repossessing a car securing a performing loan.
3. Redemption: Another way to keep your car is to pay your lender the fair market value of your car in one lump sum cash payment. If you owe $10,000 on a car worth $5,000, you would have to come up with $5,000 to pay your lender in full.
A fourth option exists which is not officially supported by the courts, but many car creditors allow it to happen. A “ride-through” is when a creditor allows the lien to pass through bankruptcy unaffected and does not repossess the car after the debtor receives his discharge. Again, this is because a creditor would rather receive your money than a car. This is probably the option most often seen in bankruptcy courts today, even though it is not officially supported by the courts and the creditor could exercise its right to repossess your vehicle at anytime.