Can a Vehicle Lender Refuse to Reaffirm My Loan?
By Jonathan Ginsberg, Atlanta Bankruptcy Attorney on Feb 10, 2008 in Chapter 7 Bankruptcy
Can a car lender refuse to reaffirm? I received this question from a Utah reader of my Atlanta Bankruptcy blog:
We had our car loans lumped together into one loan for both cars. Both vehicles are worth about 14,000 together and we only owe 6,500. If we’re filing a chapter 7 will the bank try to keep the cars if they could make oney off of them? We are not behind on any payments, and in fact have ever missed a payment on our vehicles. We’re in Utah.
My answer: I think that there are two issues to consider here. First, you need to be certain that your interest (equity) in these vehicles is “exempt” under applicable law. I practice in Georgia, not in Utah, but a brief look at Utah Code Annotated Section 78-23-8(3) suggests that you can exempt $2,500 per vehicle, for total of $5,000. If this is correct, you might have non-exempt equity here ($2,500). You would therefore have to deal with the Chapter 7 trustee’s estate interest in this $2,500. Please check with a Utah attorney to check out this exemption issue as there may be an angle to avoid a non-exempt equity problem.
Second, it is possible that the lender could refuse to reaffirm, although I suspect that such a refusal is unlikely. Most vehicle lenders would prefer to have monthly payments rather than used vehicle that would be sold at auction. In addition, I suspect that bankruptcy judges and trustees would not look too kindly on a vehicle lender that refuses to cooperate with debtors.
If the lender refused to reaffirm, then you would have the option to file a motion to redeem the property for the $6,500. See my previous post about redemption of secured collaterals in bankruptcy for more information about redemption.
If you liked that post, then try these...
Do I Qualify For Bankruptcy, Exempt Property Part 5 of 9 by Andy Miofsky, Illinois Bankruptcy Attorney
What Happens at a Bankruptcy Liquidation Sale? by Jonathan Ginsberg, Atlanta Bankruptcy Attorney
What Does the Audit Firm Do If My Bankruptcy Case is Chosen For Audit? by Peter Orville, Attorney at Law
You must be logged in to post a comment.