We're Here To Help


   Email Us Now

Should I keep my car (furniture, diamond ring, etc…) that is financed and do I need to keep paying the payments?

That is up to you. You need to think about whether you can afford to make the payments for that item. Under the bankruptcy law, in this situation (using a car as an example) you must pay for the car or surrender it to the creditor, unless it is being paid in a chapter 13 bankruptcy payment plan. You can do this in certain ways in a chapter 7 bankruptcy. First, you can sign a reaffirmation agreement, which makes you liable for the car loan after the bankruptcy is over.

This means that if you miss a payment the bank can repossess the car, sell it, and sue you for the money it didn’t get from selling the car, even though you filed bankruptcy. Second, you can redeem the property, which means that you pay the value of the property to the creditor at one time, even if it is less than you owe and you do not owe the difference between the value of the asset which you paid and the balance of the loan, which you did not pay. Third, you can surrender the property to the creditor and you do no owe any of the debt.

A fourth, more risky option is not in the bankruptcy code, but PERHAPS you could just keep the collateral, keep paying for it on time and see if the bank decides to come after you for the collateral. This used to be allowed under the old law, but the new bankruptcy law made this illegal and if the creditor wants to repossess, then it can. However, the SC Consumer Protection Code does not allow banks to repossess their collateral if the payments are current. THAT LAW DOES NOT APPLY TO CREDIT UNIONS SO THIS OPTION IS RISKY IF YOU OWE A CREDIT UNION. Some banks are just letting clients keep paying their payments and not making them reaffirm. You can believe that the bank will repossess the car if you stop paying on time, but it is less likely for the table on which only $89 is still owed. In this situation, the bank cannot sue you for the money that is owed, however. It can only collect its collateral.

If you just keep the car and make payments but do not reaffirm, then the bank may let you keep the car but not report the on time payments on your credit. There are ways around this involving using the Fair Credit Reporting Act and other law, but it is not automatic.

  • Learn More About Bankruptcy

    If its time to start considering a step toward bankruptcy we're here to help. I have been helping people through the process of filing bankruptcy in South Carolina for over 20 years. We are here for you if you have questions.
  • Download Bankruptcy Guide

    This guide is full of useful information about bankruptcy. It's a large PDF so it may take a few seconds to download.
  • Can I go to Jail for not Paying my Bills?

    No, not unless you committed a crime in the creation of the debt (for example, fraud). Simply borrowing money and not being able to pay it back is not a crime. Many creditors representatives will tell you lies on the telephone and say that they will have you put in jail. Perhaps they are too ignorant to know they are wrong or that it is illegal for them even to say that. See More Bankruptcy Q&A