Legal Question in Bankruptcy in Massachusetts

Why Sign Reaffirmation for Vehicles?

We are about to discharge on a Chapter 7 bankruptcy filing. We are keeping one vehicle that we still are making payments on. We have not signed the reaffirmation agreement. I need to know the benefits of signing vs not signing. I have been told if we do not sign, we can still pay the loan but if cannot make payments during loan they will reposses the car and we will not have to pay any money since vehicle is on bankruptcy filing. If we do sign, and cannot make payments we are liable for any difference after auction of vehicle. So why would someone sign a reaffirmation? If the credit report states vehicle in bankruptcy will the payments still post on credit report? If we do not sign, once vehicle is paid off we will still get the title right? Please tell me the benefits of signing.

Thanks for your help.

GL


Asked on 11/20/03, 5:07 pm

1 Answer from Attorneys
David Baker Law Office of David Baker

Re: Why Sign Reaffirmation for Vehicles?

The law on this particular subject is not settled yet; that is , the judges have not come to a final decision on this question. The best answer I can give is that regardless of whether you sign the reafffirmation agreement, the creditor PROBABLY cannot repossess the vehicle unless you are in default in some way - either not paying the loan or not having insurance, for example. Under the bankruptcy code, you must either reaffirm the debt, or redeem or surrender the vehicle. "Redeem" means to pay the creditor the fair cash value of the vehicle; "surrender" means give it back to the creditor. Under case law that IS settled, those are the only options you have, and if the creditor forces the issue, you would have to do one of the three, otherwise the creditor would PROBABLY be allowed to repossess the vehicle. This is a tricky area of bankruptcy law, so if you don't have a lawyer, call me for an appointment to review your specific situation. 617-367-4260 Good Luck!

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Answered on 11/21/03, 11:43 am


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