Phoenix Vehicle Reaffirmation Attorney
Representing Debtors in Bankruptcy Matters
Most people who live in the greater Phoenix metropolitan area need a car to get around. Vehicle reaffirmation is a type of agreement that can help you keep your personal vehicle when you file for bankruptcy. Consult with an experienced Phoenix vehicle reaffirmation attorney to find out if this is the right choice for you.
How Does Vehicle Reaffirmation Work?
When you file for bankruptcy, the law requires that you file a document entitled “Debtor’s Statement of Intention.” The purpose of this document is to state your intentions regarding your secured debts, including car loans. You have the options of either surrendering the property (voluntary repossession), redeeming the property (paying off the loan), or reaffirming your obligation to pay the debt to the bank or finance company. If you choose the third option for your vehicle, you need to enter a vehicle reaffirmation agreement and continue making your car payments. This makes it possible to avoid repossession of your vehicle.
What Is Arizona Law on Vehicle Reaffirmation?
Under the federal Bankruptcy Code, debtors are required to submit a vehicle reaffirmation agreement to the bankruptcy court for approval by the judge. In Arizona, however, bankruptcy judges usually do not approve these agreements. The reason they do not is to avoid potential negative consequences. If the court approved the agreement and you later defaulted on your car loan, the bank or finance company could repossess your vehicle and sue you for the remaining balance after the vehicle was sold.
On the other hand, if the court does not approve the agreement, the bank is technically entitled to repossess the vehicle, even if you are current on your payments. As a solution to this dilemma, instead of approving the vehicle affirmation agreement, the bankruptcy court may enter an order informing the creditor that:
- You have complied with the requirements of the Bankruptcy Code; and
- As long as you remain current on your monthly payments, the creditor may not repossess the vehicle.
With this order in place, if you are unable to make your car payments at any point in the future, the bank will be entitled to repossess the vehicle, but it will not be permitted to attempt to collect any remaining balance on the loan.
What Are the Benefits and Risks of Vehicle Reaffirmation?
If you live in the Phoenix area, you probably need a car. Entering into a vehicle reaffirmation agreement in bankruptcy can help you keep your vehicle and maintain a better credit score. Vehicle reaffirmation may also make it possible to reduce the interest rates and monthly payments on your car loan.
The risk with vehicle reaffirmation is that you are still responsible for your loan payments. If you should fall behind in the future, the bank could repossess your vehicle.
What Are the Steps of the Vehicle Reaffirmation Process?
- If you choose the vehicle reaffirmation option, the first step is to enter into an agreement with the bank or finance company. The agreement must state whether this will create undue hardship.
- If it creates undue hardship, the judge may set a hearing to consider approval of the vehicle reaffirmation agreement.
- In Arizona, the judge will likely deny the reaffirmation agreement.
- If the judge denies the agreement, the court may issue an order prohibiting the bank or finance company from repossessing your vehicle, as long as you make the monthly payments.
- After the order is entered, if you are unable to stay current with your monthly payments, the bank or finance company may repossess your vehicle, but you will owe nothing further on the loan.
Our experienced Phoenix bankruptcy attorneys can assist you with every aspect of bankruptcy. Contact Hilltop Law Firm at (602) 466-9631 for sound legal guidance regarding vehicle reaffirmation.