How reaffirming a debt can avoid car repossession in Maryland

A common concern for Maryland residents who are facing financial problems and considering the benefits of bankruptcy is whether certain properties will be lost. That includes a home and an automobile. These factors frequently result in a debtor avoiding filing for bankruptcy even though there are known benefits to receiving a discharge through Chapter 7. What many are unaware of is that even if they might face car repossession when filing for bankruptcy, they can reaffirm a debt to keep the vehicle.

Some vehicles are exempted from repossession in Chapter 7 despite it being a liquidation bankruptcy. Generally, these vehicles are already paid for, are older or do not have significant value. With vehicles that otherwise might be repossessed, the debtor and the creditor will come to an agreement that the debt – which would be discharged through the Chapter 7 and the vehicle repossessed – will be paid. The debtor may even get the chance to keep the vehicle while paying less than was originally owed. After reaffirmation, the creditor will not take the vehicle.

Debtors who want to reaffirm a debt must remember that it needs to be done prior to the discharge. A written agreement for reaffirming the debt must be signed and filed with the bankruptcy court. There are required disclosures in the agreement. Essentially, the debtor is informed of how much the debt will be and is told about the remaining liability. The debtor’s level of income and expenses must be provided to prove that there is money available to pay the debt. Debtors who do not have sufficient income and funds available to pay after a debt is reaffirmed could have the request denied.

A legal professional will provide various services as part of a reaffirmation agreement including certifying that the debtor is aware of the consequences of the reaffirmed debt and is doing so voluntarily. The debt cannot present undue hardship for the debtor or the court will not approve it. Concerns about a vehicle and car repossession should not prevent a person who has worrisome debt from filing for bankruptcy. Understanding the strategies that can help with retaining a car and any other aspect of bankruptcy may require legal advice.