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Question
Our chapter 7 was discharged in May of 2009. We wanted to keep our car but the lien holder wanted us to sign a reaffirmation of the loan. Our lawyer advised us against that because if something happened to the car or if I lost my job the bankruptcy would not protect us. To our surprise, a week after our case was discharged I was suddenly laid off, then a week after that the car caught on fire while my wife was driving it. We had the car towed to our mechanic to be told that the damage was not covered under our warranty. By the way, the car had been a lemon ever since we got it two years ago. Anyway I called the bank and told them to come get the car, that I no longer wanted it. When they picked it up two days later, I called our insurance and canceled the policy. A friend of mine told me that I should file a claim so that I can get a new car, but my agent told me any money would go to the lien holder and I would suffer a rate increase. I'm not sure what to do? If I file a claim will I get the money or will my lender get the money, they have the car.
This is a good example to other people about the danger of reaffirming a car loan. I'm you are glad you followed your lawyer's advice.
The lender on a car is usually able to make a claim for any damages that are covered under your insurance policy. I would certainly expect them to make such a claim. They will be the the party entitled to the money, regardless of whether or not you want a claim to be made, and they can make the claim on their own. It sounds like this is the kind of incident that might be covered under "comprehensive" coverage, assuming you bought that kind of protection. Claims made under that catagory generally have no effect on your insurance rates. To find out, check your insurance policy, and see if a spontaneous car fire is even covered and what the policy says about it.
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Answers by Expert:
Los Angeles Bankruptcy Lawyer Leon D. Bayer
Expertise
Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/
Experience
Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.
Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.
Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.
Education/Credentials
B.A., J.D.
Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000
MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.
Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.
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