Once a chapter 7 bankruptcy is completed, car lenders will often ask the debtor to reaffirm their car loan. That’s because a chapter 7 generally discharges/erases debts owed at the time the bankruptcy was filed, including what’s left on a car note. However, while the person no longer owes the debt, the car still owes. Huh? With secured creditors like mortgage and car loan holders, the person may be off the hook, but the property isn’t. In other words, if you own a Toyota RAV4 and go through bankruptcy, Toyota can no longer legally pursue collections actions with you but it can pursue the RAV4A by repossessing it. The RAV4 continues to owe, even if the bankruptcy means you no longer do. That’s part of the repayment guarantee lenders receive when they secure a loan with collateral: if you can’t repay the debt, then the property that’s collateral can.
A reaffirmation agreement is the car company/car note asking you to say you personally will repay, regardless of the debt having been discharged in bankruptcy. If you sign a reaffirmation agreement, you are putting yourself back on the hook for owing the loan. This makes debtors worse off and is why I recommend not signing them.
If you don’t think you can make your car payments after bankruptcy, or no longer want to, do not sign a reaffirmation. Let the lender go through the repossession process, which can take up to 6 months, to take back the car after the bankruptcy is finalized. However, if you want to keep your car, continue making your monthly payments fully and on-time. As long as you are current on your loan, the lender has no legal right to repossess. Not signing a reaffirmation agreement is also not a legal reason for car repossession.
However, a probable result of not signing the reaffirmation is that the car company/car lender may stop giving you on-line access to your account and the right to pay by automatic monthly withdrawal/debit. You are likely to be able to make car payments only by check after the bankruptcy, and you are likely to lose the ability to check the loan balance on-line. On-line payment and access to account information are usually removed because car lenders (like all other lenders) are not allowed to collector from debtors following bankruptcy and on-line access may be considered a collection attempt.
Bottom line: if you need or want on-line access to your car loan and fully intend to keep your vehicle, then signing a reaffirmation agreement is a good thing. If you don’t intend to keep your car, don’t sign. If you intend to keep the car and can live with sending payment by monthly check, and calling the lender when you need account information, then don’t sign a reaffirmation agreement.
December 29, 2025