Mistaken auto reaffirmation

Dear Bankruptcy Adviser,
My Chapter 7 bankruptcy was discharged last year. My auto loan (balance about $2,000) on a 2000 Dodge Intrepid was listed as reaffirmed, but we never did reaffirm. On my credit report it shows the balance of my loan as written off; I still have the vehicle. The car is about ready to be retired due to mechanical problems, and I can’t even get the junkyard to take it without the title. What do I do?
— Laura

Dear Laura,
Reaffirmation is an agreement that a debtor (you) and a creditor (the car company) enter into after a debtor has filed for bankruptcy, in which the debtor agrees to repay all or part of an existing debt after the bankruptcy case is over. For instance, a debtor might make a reaffirmation agreement with the holder of a car note that the debtor can keep the car and must continue to pay the debt after bankruptcy.

I do not know how you can reaffirm the remaining balance once your case has been officially closed. There are some grounds to reopen your case so that you can reaffirm the automobile balance, but I do not suggest that costly and risky approach. In fact, I am a little surprised that Dodge (or its finance company affiliate) has not tried to repossess your car for failing to reaffirm the remaining balance. Some lenders aggressively take the approach “reaffirm, redeem or surrender.” However, many others do not want another car on the lot, so I also understand why you still have the car.

Some car lenders are not taking such a hard-line approach regarding reaffirmation agreements when the car balance is so low. In your case, between the time you filed your case and the time you received notification that your case was closed, you probably paid the remaining balance on the car.

Now, you get to play telephone musical chairs to try to get in touch with the right person at Dodge (or the finance company). Between finding the right person and talking to all the intermediaries, you will be told every possible story. Someone will tell you that you do not get your pink slip back because you did not reaffirm the balance. Someone else will probably tell you that you need to turn the car in. Another person will probably be unable to find you in the system altogether.

Stay calm and continue to work the chain. You want to talk to someone in either the bankruptcy or the loss mitigation department. Make sure you have good documentation to show that the balance has been paid in full or determine how much you have left to pay.

You are legally entitled to receive the pink slip to your vehicle once it is paid in full. Do not be surprised if some bankruptcy fees have been added to the balance, but all-in-all, you have paid off the car and will get the pick slip through patience and persistence.

Unfortunately, I cannot help you with your credit report. Most of the car lenders I have dealt with state that you must reaffirm the car loan before they will report your post-bankruptcy payment history to the credit bureaus. As a result, the negative notation that the car balance has been written off appears to be unavoidable. While you will have the pink slip soon, you may never get credit for paying off the car as agreed.