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Jul 2012After bankruptcy: Changed my mind. Can I still give back the car?
Posted by Robert Weed / in After Bankruptcy / 18 comments
I get a question like this a couple times a week.
My name is Ben Chambers.
You handled my bankruptcy about 8 months ago it went well–thank you very much. I just have a quick legal question.
At the time I decided to keep a car my Kia Sorento 2005 and pay the monthly loan amount.
Now I found a cheaper car that I can buy and not be stuck with the payment.
If I stop paying the Kia will they repo the car and if they do will I be in trouble again ? I am in a very good way to reestablish my credit by following your advice.
Please help me with the Kia matter. Thank you again for everything.
In the first year or so after bankruptcy, many people ask me if they can still give back the car. They planned to keep it when they filed bankruptcy, but now it doesn’t make sense. Sometimes because of a mechanical problem. Some people, like Ben Chambers (not his real name), are able to buy a junker for cash and want to get rid of the one with a payment.
The good news is that it’s ok to do that. The bankruptcy still protects you. If you stop paying, they can come and repossess it, but they cannot get any money from you.
They also cannot legally put a repossession on your credit. Your credit shows the bankruptcy and nothing after that. Your credit does not show if you do pay after the bankruptcy, it does not show if you don’t pay. (It’s a good idea, however, to check your credit and make sure.)
There’s an exception–that’s if you reaffirm the debt during the bankruptcy. If you reaffirm, then you take the debt completely out of the bankruptcy, and you can’t change your mind down the road. I hate it when people do that.
Why do people reaffirm? Well, in Virginia (not all states) Ford Motor Credit will repossess–even if you are CURRENT–if you don’t reaffirm. I’d like to tell Ford to eat steel, but some people really need that car and do reaffirm.
Some people reaffirm to work out a settlement with their credit union. Credit unions do something that’s illegal for banks. Credit Unions get you to sign in small print that the credit card is also attached to your car loan. When people have a good car loan, and a good car, sometimes I’ll suggest they reaffirm just the car loan part–and the credit union agrees they won’t come after the car for the credit card.
Usually, reaffirming is a mistake. I get about a dozen reaffirmation requests sent to me each month from car finance companies that do NOT repossess current cars. I tell my clients up front that we’re throwing them in the trash.
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Robert Weed has helped fifteen thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.
Bonnie
I have a car that is within a bankruptsy chapt 13 but my son is paying the note, so bankruptsy just is around it. The motor is going out he needs a different car what do i do? He cant make two payments
Robert Weed
Bonnie:
Not sure what is going on here. you are in Chapter 13? You have a car loan on a car your son is driving? Your son now needs a new car? Don’t know what his situation is, but sounds like he needs to get a car? There must be more here I don’t understand–do you think you need to keep financing a car for your son? Why?
Harry
Even though I filed for Chapter 7 in North Carolina, I have come to enjoy your blog! I do want to make a comment about keeping the car without reaffirmation. My payments are current and always have been. My attorney told me that my two creditors were fine with “retain and pay”. I was a little nervous about that concept, thinking these lenders would just wait until my discharge was final, and then pounce…I’d wake up one morning and find my cars gone! He said that’s not how it works. Anyway, I called both creditors and they both confirmed over the phone what my attorney said – if the payments are kept current they will not move to repossess post-discharge. In fact, neither lender even bothered sending reaffirmation agreements to my attorney! The lenders are TD Bank and NMAC by the way. So…I guess the questions is now…if I can change my mind and give the cars back without consequence at a point in the future, can they change their minds and repossess the cars in the future? Ever heard of a lender that allowed “retain and pay” at first changing their mind later and repossessing, due strictly to lack of reaffirmation way back when?
Robert Weed
Harry:
I’m glad that your lawyer and I have given you the same advice. Yes, they could change their minds at any time and come get the car; but no, I’ve never seen them do it as long as you don’t get late.
Cory Jones
Hi Robert,
I was recently discharged for a chapter 7 bankruptcy. I decided to keep my car, which is cosigned by my brother (actually a co-applicant). However, I’m thinking about giving the car back and purchasing something cheaper. My question is if I do so, how will this effect my brother, who has not filed for bankruptcy? Would it go on his credit as a repossession?
Robert Weed
Cory:
Yes, it would.
Stephen
Hi Robert,
Would the same apply to a car lease? I reaffirmed my car lease in my chapter 7 bankruptcy that was discharged back in March, but now I have a chance to get into something much cheaper. I have been making the payments on time since then, but can I either stop paying or take it back to the dealership and still be protected by the bankruptcy?
Robert Weed
Stephen:
NOT if you REAFFIRMED the lease. If you reaffirmed, you are stuck.
Tony
Thank you, Robert, for your advice. I was just checking to see how I would find out if I reaffirmed it or not to make sure I am making the right decision?
Robert Weed
You need to look in the court docket and see if one was filed; or get your lawyer to look for you.
Jen
Hi Mr. Weed. I recently filed Chapter 7 bankruptcy. My attorney sent me a reaffirmation agreement for my mortgage. I asked him if I had to sign it. Here is his response, “First, whether she signs or not she has to keep making her mortgage payments in a timely fashion. If she does not sign a reaffirmation agreement, the creditor could possibly foreclose on the mortgage. It depends on the language on her mortgage. Most mortgages state that if you file bankruptcy, it is a default on the loan unless you file a reaffirmation agreement. But, I know some a handful of clients that have not signed one and kept their home because they kept their payments timely. But, that is a risk.”
I have never been late on my payment but I don’t want to reaffirm. Will the mortgage company see it as a default on the loan if I don’t sign the agreement? I don’t know if this matters but I am in the state of Indiana.
Robert Weed
Jen:
Here in Virginia they do not foreclose on mortgages that are current, even if you don’t reaffirm. In fact, they are not allowed to.
BUT the Judges, and the mortgage companies, might see the law differently there in Indiana. I have no way of knowing for sure. Your lawyer doesn’t want to take responsibility to give their best advice. But from this distance I can’t do any better.
Frank Conigliaro
Hi Mr Weed,
My Chapter 13 has been discharged for over 2 years now. I left the car loan I had out of the bankruptcy and have been making payments on it. The car also has my sisters name on it since my credit was bad. My question is if I stop making payments can they still come after me or her and will it effect our credits. The car does not show up on any of my credit reports nor does it show up on any of hers. She recently bought a new car and home too. When I called the bank they had told me that it will never show up on our credit report because of the bankruptcy.
Thanks for your time!
Robert Weed
Frank:
For sure, your sister still owes the car payment. The bank MAY have it coded wrong, but they can come after her if they figure it out. You are in a gray area. My reading of Chapter 13 is that you are now off the car loan and if you stop paying they CANNOT come after you. But some judges don’t see it that way. Sorry that I am not much help.
Melissa
My daughter filed Chapter 7 and was discharged in May 2018 in Florida. In her “statement of intention” she stated she wanted to continue with her lease with VW which is up to turn in now in October 2018. VW is not currently reporting her payments as of January 2018 which is when she filed for her Banruptcy. On her current credit report it is showing VW as a closed account, no reproted payments, 0 balance and on the note it states “Debt included in or discharded through Bankruptcy Chapter 7, 11, or 12”. Out of all that was discharged this was the only account she paid every month on time to date. Since the filing and after the discharge she has not been able to make her payments online she always needs to call in her payment. They locked her online account. My daughter never signed a reaffirmation agreement with the debtor. She would like to release the car early with 3 payments remaining but also because she is about $4000 over in her mileage. If she turns in her lease early can they damage her credit for the remaining payments and over mileage fees. She does not have $4000 to come up with, we are kind of stuck not knowing what to do.
Robert Weed
Melissa:
Good question. (What does her lawyer say?) If she turns in the lease early, they are NOT allowed to hit her credit, or her, for the payments she did NOT make.
They MIGHT be able to make an issue about the over mileage, but they’d have to show how much of the over came after the BK was filed. I’ve never seen them try to do that here.
Michelle Thomas
I recently filed bankruptcy in January 2019 and during the process i stated i wanted to surrender the car now that i have thought about it i think i want to keep the car and now i have went in front of the trustee and just waiting for my discharge papers is that at all possible
Robert Weed
Michelle:
Ford Motor Credit will repossess cars when you file bankruptcy, even if you are current. Hardly anyone else does that. So if you kept the payments current, you should be able to keep the car.