There are two different issues about your car in Chapter 7. One involves the trustee and the other, the lender with a lien on the car.
The trustee may be interested in the car if there is significant non exempt equity in the car. If there is, he may want to sell the car, pay the lender, your exemption, and use the balance for your creditors. If the trustee seeks to sell the car, the most promising buyer is usually the debtor himself.
The other issue is the car lender. The lender doesn't want the car back, it wants a stream of payments. So if there is nothing in the car for the trustee, the lender wants you to reaffirm the obligation to pay on the car and to continue making payments through the bankruptcy and beyond the discharge.
When you reaffirm the debt, you waive the discharge as to that creditor. That means that if you fail to pay some time in the future, the lender can not only repossess the car, but also sue you for any shortfall between the car's sale price and the debt.
For loans with significant balances, reaffirming the debt is a serious step and it may cloud your fresh start. Your attorney can help you explore the alternatives.
-- Cathleen Cooper Moran
