Overhaulin'

After you file Chapter 7, if you want to reapportion the car how does the car payment change or does it?

The vehicle that I have, the loan payoff is 14k and the car is worth about 8K. If I decide to keep the car after I file for a Chapter 7, I believe that I a need to reapportion the car. What happens to the car payment? Does it stay the same or do they modify it? I live in California.

Public Comments

1. It is called reaffirming the loan, and once you reaffirm, it is up to the lender to decide whether they'll allow you to change the terms. Most likely, you'll need to refinance with the lender if you want to modify the loan. In any case, you have to go through the formal reaffirmation process first.
2. There are a few things you can do. You can "Reaffirm" the car loan and this just keeps everything the same as before with your loan. If you fail to pay on the loan after you reaffirm the debt they can come after you and you won't have BK protection. After you Reaffirm the loan you can attempt to refinance it, however since you have a recent bankruptcy any reduction in interest is probably not going to happen. There is another concept known as a "722 Redemption". This is where you pay off the car based on the current value. So in your case you would pay 8K and then have the car free and clear. If you can't come up with this lump sum there are banks that finance these types of loans. Just as with reaffirming if you fail to pay this loan you no longer have BK protection. The third thing you can do is just surrender the car back to the bank, and start over. There are advantages and disadvantages to each of these items so you should consult your attorney to have them give you the ramifications of each choice in your situation.