If you have decided to file Chapter 7 bankruptcy, one concern that has probably crossed your mind is whether you will be able to keep your car after the bankruptcy. After all, life goes on... you still have a job to drive to and errands to run - so you want to make sure that you are still going to have a means of transportation.

If you are not making payments on your car, the answer is simple - you can use an exemption to keep your car, just like you would for any other asset.

On the other hand, if you are still making payments on your car, the issue is a bit more complicated. There are several ways you can handle your car note, depending on whether or not you really want to keep the car. Whatever you decide, your decision will be communicated through a Statement of Intention (SOI), which is sent to your lender and filed with your bankruptcy paperwork.

If you don't want to keep the car, you can simply walk away from the note by indicating your intent to surrender the car on the SOI. If your vehicle is leased, you will use the SOI to reject (break) the lease.

Suppose, however, that you want to keep the car. You can either pay a lump sum to purchase the car outright (called a 'redemption'), or continue making payments on the car through a reaffirmation or ride-through option. A reaffirmation is a new contract with your lender; a ride-through is a continuation of the same contract - the choice is up to your lender. Either way, you will state your intention to continue making payments on the SOI.

One caution about reaffirmation: If you reaffirm a car note, but the car is worth less than the note, you'll be on the hook for the difference if you can't make your payments. Losing a car is bad... but losing a car and still having to make payments on it is terrible!

Author: Jay Fleischman

About the author:
New York bankruptcy lawyer Jay S. Fleischman is the Managing Attorney of Fleischman Consumer Law Center. He has helped thousands of New York consumers end their bill problems and get back their good credit. Go to http://www.NewYorkBankruptcyHelp.com to learn more about your options, ask questions, and get more information.

Article source: Free Bankruptcy Articles.