If you have a car loan, you might wind up in Bankruptcy Court by yourself (if you don’t have theright attorney) – Part One

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Stephen Behrends Law Office | Bankruptcy | Eugene, OR


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This blog is for people who are thinking that they might have to file bankruptcy. I have been helping people work through their financial problems for so many years that I know the concerns that come up again and again. I want to provide practical information that you can use right now in helping decide how to take on these complicated issues.

If you have a car loan, you might wind up in Bankruptcy Court by yourself (if you don’t have theright attorney) – Part One

By Stephen Behrends, Jan 7 2018 09:09PM

A while back, I wrote about a recent day in Bankruptcy Court where the attorneys in a majority

of the cases on the docket did not attend the Reaffirmation Hearing with their clients. Could this

happen to you? Of course, if you hire one of the attorneys at Behrends, Carusone & Covington, it

will not! But does everyone have to go to a Reaffirmation Hearing?

If you have a car loan, you will probably have to go to a Reaffirmation Hearing. Does this mean

that car loans always have to be reaffirmed? Furthermore, is this the answer to why these other

attorneys don’t to- because there really is nothing for them to do since the reaffirmation of a car

loan is more or less automatic?

The answers to these questions show why this is maybe the most confusing thing in the typical

basic non-controversial consumer bankruptcy. Many people have car loans and most of them

want to keep their cars. They usually believe that this means that there has to be a Court

approved reaffirmation agreement for this to happen. However, it is much more complicated than


Basically, a car loan is often up-side down from the time you drive the car off the lot. This means

that if you couldn’t pay for it and had to give it back, the lender would sell it for very little, apply

the money from the sale first to the costs of recovering, storing and then selling your car and only

then pay any remaining funds to what you owe. This usually means that you still owe a lot even

though you don’t have the car anymore.

If this happens before you file bankruptcy, the answer is that this remaining debt, called the

“deficiency” is included in the discharge. But what if it is after the bankruptcy case is over? If

you have a car loan, you have to sign a reaffirmation agreement and, if the Court approves it, the

lender could collect the deficiency if you can’t pay for the car after the bankruptcy is over. This

could end up with you being sued and your wages garnished just as though if you had never filed


But if you go to a reaffirmation hearing, the answer result be completely different. I will tell you

how in my next post!

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