Why You Have To Reaffirm Car Loans

Your car is one of your most important possessions. You want to keep it when you file a bankruptcy case. Most people have some sort of a car loan. Automobile finance companies such as TD Financial and Ford Motor Credit, are very interested in your bankruptcy case. Most times in bankruptcy, they want to repossess your car right away. Maybe you’ve been behind in your payments. Maybe you don’t have insurance. But if you want to keep your car, you have to reaffirm. And you have to reaffirm right away.

Statement of Intention

You have to state your intention as to whether you want to surrender your car, reaffirm the debt or redeem the vehicle. Simply “riding through” – doing nothing, getting discharged and continuing to pay the car after bankruptcy generally is not available as an option. You have to act on your statement of intention promptly – within 45 days.

The reaffirmation agreement

To sign a reaffirmation agreement, you are contracting to pay the car loan after bankruptcy just as you owed it before. You won’t get a discharge from this debt. If you don’t pay the debt in the future, you’re still liable personally for it. You have to be up to date with payments to reaffirm. Otherwise, you’ll lose the car and still be liable on the debt. You need to be able to afford the loan. Maybe you can, maybe you can’t. Your lawyer must also attest to your ability to pay.

When to file a reaffirmation agreement

A reaffirmation agreement must be signed before discharge. So don’t delay. And if you don’t sign a reaffirmation agreement, the car lender may seek an order from the bankruptcy court saying the automatic stay is terminated and then repossess your car.

You may surrender the car and you will not be responsible for any deficiency after you receive your discharge.

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Bankruptcy Stops Student Loan Wage Garnishment

11 USC § 362 – Automatic stay (a)Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of—
(1)the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(2)the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;

(3)any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;

(4)any act to create, perfect, or enforce any lien against property of the estate;

(5)any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;

(6)any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;

(7)the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and

(8)the commencement or continuation of a proceeding before the United States Tax Court concerning a tax liability of a debtor that is a corporation for a taxable period the bankruptcy court may determine or concerning the tax liability of a debtor who is an individual for a taxable period ending before the date of the order for relief under this title.

Federal law allows student loan creditors to garnish a borrower’s wages as follows:

(a) Garnishment requirements
Notwithstanding any provision of State law, a guaranty agency, or the Secretary in the case of loans made, insured or guaranteed under this subchapter and part C of subchapter I of chapter 34 of title 42 that are held by the Secretary, may garnish the disposable pay of an individual to collect the amount owed by the individual, if he or she is not currently making required repayment under a repayment agreement with the Secretary, or, in the case of a loan guaranteed under part B of this subchapter on which the guaranty agency received reimbursement from the Secretary under section 1078(c) of this title, with the guaranty agency holding the loan, as appropriate, provided that—

(1)the amount deducted for any pay period may not exceed 15 percent of disposable pay, except that a greater percentage may be deducted with the written consent of the individual involved;

(2)the individual shall be provided written notice, sent by mail to the individual’s last known address, a minimum of 30 days prior to the initiation of proceedings, from the guaranty agency or the Secretary, as appropriate, informing such individual of the nature and amount of the loan obligation to be collected, the intention of the guaranty agency or the Secretary, as appropriate, to initiate proceedings to collect the debt through deductions from pay, and an explanation of the rights of the individual under this section;

(3)the individual shall be provided an opportunity to inspect and copy records relating to the debt;

(4)the individual shall be provided an opportunity to enter into a written agreement with the guaranty agency or the Secretary, under terms agreeable to the Secretary, or the head of the guaranty agency or his designee, as appropriate, to establish a schedule for the repayment of the debt;

(5)the individual shall be provided an opportunity for a hearing in accordance with subsection (b) of this section on the determination of the Secretary or the guaranty agency, as appropriate, concerning the existence or the amount of the debt, and, in the case of an individual whose repayment schedule is established other than by a written agreement pursuant to paragraph (4), concerning the terms of the repayment schedule;

(6)the employer shall pay to the Secretary or the guaranty agency as directed in the withholding order issued in this action, and shall be liable for, and the Secretary or the guaranty agency, as appropriate, may sue the employer in a State or Federal court of competent jurisdiction to recover, any amount that such employer fails to withhold from wages due an employee following receipt of such employer of notice of the withholding order, plus attorneys’ fees, costs, and, in the court’s discretion, punitive damages, but such employer shall not be required to vary the normal pay and disbursement cycles in order to comply with this paragraph;

(7)if an individual has been reemployed within 12 months after having been involuntarily separated from employment, no amount may be deducted from the disposable pay of such individual until such individual has been reemployed continuously for at least 12 months; and

(8)an employer may not discharge from employment, refuse to employ, or take disciplinary action against an individual subject to wage withholding in accordance with this section by reason of the fact that the individual’s wages have been subject to garnishment under this section, and such individual may sue in a State or Federal court of competent jurisdiction any employer who takes such action. The court shall award attorneys’ fees to a prevailing employee and, in its discretion, may order reinstatement of the individual, award punitive damages and back pay to the employee, or order such other remedy as may be reasonably necessary.

(b) Hearing requirements
A hearing described in subsection (a)(5) of this section shall be provided prior to issuance of a garnishment order if the individual, on or before the 15th day following the mailing of the notice described in subsection (a)(2) of this section, and in accordance with such procedures as the Secretary or the head of the guaranty agency, as appropriate, may prescribe, files a petition requesting such a hearing. If the individual does not file a petition requesting a hearing prior to such date, the Secretary or the guaranty agency, as appropriate, shall provide the individual a hearing under subsection (a)(5) of this section upon request, but such hearing need not be provided prior to issuance of a garnishment order. A hearing under subsection (a)(5) of this section may not be conducted by an individual under the supervision or control of the head of the guaranty agency, except that nothing in this sentence shall be construed to prohibit the appointment of an administrative law judge. The hearing official shall issue a final decision at the earliest practicable date, but not later than 60 days after the filing of the petition requesting the hearing.

(c) Notice requirements
The notice to the employer of the withholding order shall contain only such information as may be necessary for the employer to comply with the withholding order.

(d) No attachment of student assistance
Except as authorized in this section, notwithstanding any other provision of Federal or State law, no grant, loan, or work assistance awarded under this subchapter and part C of subchapter I of chapter 34 of title 42, or property traceable to such assistance, shall be subject to garnishment or attachment in order to satisfy any debt owed by the student awarded such assistance, other than a debt owed to the Secretary and arising under this subchapter and part C of subchapter I of chapter 34 of title 42.

(e) “Disposable pay” defined
For the purpose of this section, the term “disposable pay” means that part of the compensation of any individual from an employer remaining after the deduction of any amounts required by law to be withheld.

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