If you filed Chapter 7 bankruptcy and you want to keep your vehicle, you may be wondering:
“Should I reaffirm my car loan?”
“Is reaffirming required?”
“What happens if I don’t reaffirm?”
This is one of the most important decisions people face in Chapter 7 — because reaffirmation can affect your financial future long after bankruptcy is over.
Here’s a breakdown of the pros and cons in plain English.
What Does It Mean to Reaffirm a Car Loan?
A reaffirmation agreement is a legal agreement signed during Chapter 7 bankruptcy where you agree to remain personally responsible for the car loan debt even after bankruptcy.
That means:
- the loan survives bankruptcy
- you still owe the full balance
- the lender can repossess if you fall behind
- and you could still owe money after repossession (deficiency balance)
Is Reaffirming a Car Loan Required?
No.
You are not required to reaffirm in order to keep the car in every situation.
Some lenders allow you to keep paying and keep the car without reaffirming (often called a “ride-through”).
However, not all lenders allow this, and policies vary.
Pros of Reaffirming a Car Loan
✅ 1. You May Be More Likely to Keep the Car
Some lenders insist on reaffirmation. Signing may prevent repossession.
✅ 2. You Can Rebuild Credit Faster
Many lenders only report payments to the credit bureaus if the loan is reaffirmed.
So reaffirming may help improve your credit score over time.
✅ 3. It Keeps the Loan Relationship Normal
Reaffirmation often keeps the loan active the same way it was before bankruptcy, making it easier to:
- make payments online
- refinance later
- get payoff statements
Cons of Reaffirming a Car Loan
❌ 1. You Lose Bankruptcy Protection on That Debt
Once you reaffirm, bankruptcy no longer protects you from the car loan.
If something happens later, you are fully responsible.
❌ 2. You Could Owe a Deficiency Balance
If the car gets repossessed or totaled, and insurance doesn’t cover the full balance, the lender could come after you for the remaining amount.
❌ 3. You Might Be Reaffirming a Bad Deal
Some people reaffirm loans where:
- the interest rate is high
- the car is worth much less than the loan
- the payments are unaffordable
That can put you right back into financial trouble.
What Happens If You Don’t Reaffirm?
If you don’t reaffirm, you may still be able to keep the car as long as you keep paying.
In many cases:
- you continue making payments
- the lender leaves you alone
- but they may stop reporting payments to your credit report
- and the lender may still repossess if you default
The biggest benefit is:
You may not be personally liable if something goes wrong later.
When Reaffirmation Might Make Sense
Reaffirmation may be worth considering if:
✅ the car is reliable
✅ the payment is affordable
✅ the interest rate is reasonable
✅ you are close to paying it off
✅ you need the credit reporting benefit
When Reaffirmation Might Be Risky
Reaffirmation may be a bad idea if:
❌ the car is upside down (you owe more than it’s worth)
❌ the payment is too high
❌ the loan has a very high interest rate
❌ you’re unsure about future income stability
❌ the vehicle may need major repairs soon
The Bottom Line
Reaffirming a car loan in Chapter 7 can help you keep your vehicle and rebuild credit — but it can also put you back on the hook for debt bankruptcy was designed to eliminate.
Before signing, ask yourself:
- Can I truly afford this long-term?
- Is the car worth the debt?
- What happens if I lose my job or the car breaks down?
Final Thought
A Chapter 7 discharge is meant to give you a fresh start. Reaffirming a car loan is one of the few choices that can take that protection away — so it should always be a thoughtful decision, not an automatic one.
