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Should I Reaffirm My Automobile Debt In Chapter 7? What Is A Reaffirmation Agreement? What Are My Options?

Robert J. Adams and Associates Oct. 9, 2019

Bankruptcy can disrupt your life. It can bring about changes that you never planned on. And for many people who live outside major cities with excellent public transportation options, a car is their connection to food and work. Giving up your car in a bankruptcy can be a difficult decision, but you do have choices. As a top bankruptcy and Chapter 7 attorney firm, Robert J. Adams & Associates has been down this road many times with clients and we will advise you about all your choices, to ensure that your Chapter 7 goes smoothly and causes you the least amount of inconvenience possible.

Individuals who file Chapter 7 bankruptcy frequently have a car note. They often ask “What do I do about my car?”

When there is Chicago automobile debt in Chapter 7, some clients want to keep their car and continue to pay the car note. Some find the car and the car note to be a burden and desire to return the car.

Keeping the car or returning it is always your choice when you have Chicago automobile debt in Chapter 7. This is why every one of my Chapter 7 clients with a car note receives the following letter:

If you have Chicago automobile debt in Chapter 7, and possess a car note, I hope this helps you.


Dear Mr./Ms./Mr./Mrs. ( ______________ ),

You are receiving this letter because you have a car note.

When you have an automobile that is being financed, upon filing a Chapter 7, you have the following options:

  1. Reaffirm the debt;

  2. Surrender the car and owe nothing;

  3. Redeem the car for its retail value; or

  4. Do nothing and continued to pay the car note.


A reaffirmation agreement is between you and the company financing your car. Generally, the financing company will only agree to a reaffirmation if you are current on your car note and have physical damage insurance.

When you sign a ‘reaffirmation agreement’ you agree to be responsible for the debt despite having filed for bankruptcy. This means that if you default on the car note the finance company can repossess your car and sue you for a deficiency balance after they sell the vehicle.


You have the option of ‘surrendering’ the car and you will then be discharged of the debt. Some car dealers will even sell you another car, possibly with better terms.


You have the option to ‘redeem’ the car for its retail value, meaning if the balance of the car note greatly exceeds the car’s value you can ‘buy’ the car for its value. Regarding Chicago automobile debt in Chapter 7, rarely will an individual have the resources to redeem their car. You may find a company that will finance your redemption, and even though their interest rates are often high, it may still be a better deal for you. If you have Chicago automobile debt in Chapter 7, talk to your bankruptcy attorney about redemption and all your options.


If you want to keep your car, you should be advised that this is not recommended because the finance company can still repossess your car after bankruptcy—even if you are current on your payments.

When you agree to reaffirm your car debt we must certify that the reaffirmation will not create an undue hardship for you. We can only certify a reaffirmation if the Income and Budget schedules filed in your case have sufficient income to pay the creditor after the discharge.

When it comes to replacing your car or financing a redemption, all dealings are between you and the company. We can refer you to companies offering these services but we have no influence on their decision making process.

Also, if you enter into a reaffirmation agreement but later change your mind, can you reject it? The answer is yes but only for a limited time, the latter of either below, as follows:

  1. 60 days after the reaffirmation is filed with the court; or

  2. The date the Bankruptcy Court issues a discharge in your case

When you’re facing bankruptcy, it’s never easy emotionally. Bankruptcy naturally causes a lot of anxiety because no one ever expected to be ‘here’ and suddenly they are, filing for bankruptcy. It can make you feel like your life has gone off track, but bankruptcy is actually a great option for many who are suffering needlessly from the daily anxiety and stress of creditors calling, harassing them, and demanding payments. If you look at it in a positive light, consider bankruptcy as an opportunity to start fresh, to begin your life again with a clean slate, moving forward into a great, new real chapter in your life, after your Chapter 7.