After bankruptcy: Changed my mind. Can I still give back the car?


I get a question like this a couple times a week.

 My name is Ben Chambers.

You handled my bankruptcy about 8 months ago it went well–thank you very much.  I just have a quick legal question.

At the time I decided to keep a car my Kia Sorento 2005 and pay the monthly loan amount.

Now I found a cheaper car that I can buy and not be stuck with the payment.

If I stop paying the Kia will they repo the car and if they do will I be in trouble again ? I am in a very good way to reestablish my credit by following your advice.

Please help me with the Kia matter.  Thank you again for everything.

In the first year or so after bankruptcy, many people ask me if they can still give back the car.  They planned to keep it when they filed bankruptcy, but now it doesn’t make sense.    Sometimes because of a mechanical problem.  Some people, like  Ben Chambers (not his real name), are able to buy a junker for cash and want to get rid of the one

After bankruptcy, sometimes that car you're keeping gets big repairs bills. Can you change your mind and "include" it in the bankruptcy?

with a payment.

The good news is that it’s ok to do that.  The bankruptcy still protects you.   If you stop paying, they can come and repossess it, but they cannot get any money from you.

They also cannot, legally, put a repossession on your credit.   Your credit shows the bankruptcy and nothing after that.   Your credit does not show if you do pay after the bankruptcy, it does not show if you don’t pay.    (It’s a good idea however to check your credit and make sure.)

There’s an exception–that’s if you reaffirm the debt during the bankruptcy.  If you reaffirm, then you take the debt complete out of the bankruptcy and you can’t change your mind down the road.  I hate it when people do that.

Why do people reaffirm?  Well, in Virginia (not all states) Ford Motor Credit will repossess–even if you are CURRENT–if you don’t reaffirm.  I’d like to tell Ford to eat steel, but some people really need that car and do reaffirm.

Some people reaffirm to work out a settlement with their credit union.  Credit unions do something that’s illegal for banks.  Credit Unions get you to sign in small print that the credit card is also attached to your car loan.  When people have a good car loan, and a good car, sometimes I’ll suggest they reaffirm just the car loan part–and the credit union agrees they won’t come after the car for the credit card.

Usually, reaffirming is a mistake.  I get about a dozen reaffirmation requests sent to me each month from car finance companies that do NOT repossess current cars.  I tell my clients up front that we’re throwing them in the trash.