Reaffirming Your Car Loan is NOT a Requirement in NJ Bankruptcy

Reaffirmation Agreement with glasses laying across the agreement

Despite what you might have been told by your creditors, you may not have to sign a reaffirmation agreement on your car loan in order to avoid repossession or to rebuild your credit score after filing for bankruptcy.

What is a Reaffirmation Agreement?

A reaffirmation agreement is a voluntary document that legally obligates a borrower to pay some or all of what they owe on a specific account instead of discharging the debt in bankruptcy.

In a 2020 Southern California hearing, a debtor said that she was under pressure from Wells Fargo to sign a reaffirmation agreement in order to keep her car and improve her credit score.

This led US Bankruptcy Judge Margaret M. Mann to issue an Order to Show Cause. The results? Wells Fargo stated that they don’t repossess cars if payments are current, and a reaffirmation is irrelevant to the process.

This lack of repossession may not be true for all lenders, but it provides insight into whether signing a reaffirmation agreement would rebuild credit.

In addition, an expert for Wells Fargo stated that an account included in bankruptcy wouldn’t be evaluated by the scoring model, so a reaffirmation agreement would have essentially no impact on credit score.

Reporting of positive payment history on a Bankruptcy Discharged account may not impact a debtor’s credit score. 

The Right Way to Rebuild Your Credit

The most reliable way to rebuild your credit after bankruptcy is by making your monthly payments on time. Not just the minimum amount due, but the entire balance.

The last thing you want is to get behind and dig yourself into a deeper hole, so make sure to completely pay off your utility bills, credit card and car payments. You also want to make sure you plan properly to have long-term success.

Don’t take on any new bills you can’t handle and choose your expenses carefully. One way to do this is to get a low-balance gasoline credit card to help you take care of necessities.

Rebuilding your credit isn’t going to happen overnight. It takes a lot of patience and discipline, but a year of smart spending habits will help you start to get better credit again.

Finally, please be cautious with credit repair companies. They often claim they can remove negative information from a credit report in less than a month and usually charge large upfront fees in the process.

Simply put, the law just doesn’t work the way credit repair companies want people to believe. There are no shortcuts. It’s going to be about seven to ten years to get a clean credit report again.

The best way to rebuild your credit is with smart, properly planned spending habits. If you need help on this journey, an experienced bankruptcy attorney can be your best ally.

Contact our Attorney in Cherry Hill, NJ Today

You can rebuild your credit after bankruptcy, but it takes time and smart planning. There are no quick fixes. Attorney Joel R. Spivack can help you plan for a secure financial future. Contact us today at 856-488-1200 to get your free initial consultation.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

We are here to help you.

Is this a New Jersey matter or Philadelphia Region matter?
We are licensed to practice in New Jersey and Pennsylvania.

Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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