One of the more complex aspects of your Chapter 7 bankruptcy is the matter of your vehicle and whether you should reaffirm that loan obligation. It is likely if you live in the Appleton region, you need a vehicle to get to and from work. The question is, do you need this particular vehicle? The answer, of course, depends on the facts of your personal situation.

During a Chapter 7 bankruptcy, you have a couple of options for your vehicle. You can surrender your vehicle to the lender. They will then have to sell the vehicle at auction and will likely experience a significant loss on the transaction.

Without the protection of the bankruptcy discharge, they could then attempt to collect the difference between the loan balance and the amount they receive after selling the vehicle and paying their costs. This is known as a deficiency balance, and your bankruptcy discharge prohibits their attempting to collect this balance.

You could also redeem the vehicle, which requires that you pay the current market value of the vehicle in full. Since most people file bankruptcy because they are short on cash and already have difficulty paying their bills, this option is rarely exercised.

The last option is to sign a reaffirmation agreement. This agreement essentially restarts your loan obligation, often to where it was was prior to the filing of the bankruptcy. This means you do not obtain a discharge of this debt during this bankruptcy and if you miss payments after your bankruptcy is complete, the lender may repossess the vehicle and assess a deficiency against you.

Because of this, reaffirmations must be carefully thought through. Next time, we will look at some of the considerations you should make when thinking about the decision to reaffirm.