Legal Question in Bankruptcy in Virginia

Reaffirmation Agreement

I just filed Chapter 7 and went before the trustee on 12/31/08. I received paperwork for a reaffirmation agreement from the bank in regards to my car loan. My lawyer says he doesn't believe in them -said they are ''against'' his religion''. I owe roughly $3200 on the car. Its a 2001 Highlander SUV in good condition. He has advised me to just sit tight until I am officially cleared by the courts for my bankruptcy. Says considering I have been making timely payments on the car, he doesn't think the bank will repo it, but no guarantees. I cannot lose my car - I need it to get to and from work. I have asked if I should sell the car to my mother for the value of my loan, then pay off the loan. By selling, I know i'd lose the $2000 exemption..which he says he can protect about $1400 of if I do another homestead deed, leaving $600 for the trustee which he believes the trustee won't bother with. I am confused as to what I should do. He is not giving me solid advice and i am lost. Do I just sit tight? Do I sign the reaffirmation agreement? Do I sell the car to my mom (I would still have a car to drive to work!)? My lawyer says signing a reaffirmation agreement will only open a whole new can of worms and the trustee may still deny me.


Asked on 1/23/09, 9:45 am

1 Answer from Attorneys
Daniel Press Chung & Press, P.C.

Re: Reaffirmation Agreement

Do not sell or transfer the car. You don't say where you are located, but the basic rule in the Eastern District of Va., at least, is that if you submit a reaffirmation agreement and it is rejected (by the court, not the trustee), it still prevents the lender from repossessing based on a bankruptcy filing alone, without a payment or insurance default. If you have substantial equity in the car, and no problem with making the payments, the reaffirmation can rarely cause adverse consequences. While it is true that a repo without a payment or insurance default is unlikely, if your equity is large enough, it probably makes sense to reaffirm and hope that the court denies it (which it will if the lawyer refuses to sign). Discuss this with your lawyer before doing anything, though - give him a chance to explain.

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Answered on 1/24/09, 2:27 am


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