Chapter 7 Bankruptcy and Vehicle Loans

In a Chapter 7 bankruptcy, if you schedule your car loan but do not reaffirm it, your personal liability for the debt is discharged under 11 U.S.C. § 524, meaning the creditor cannot sue you personally for any deficiency or unpaid amounts post-discharge. However, the creditor’s security interest (lien) on the vehicle survives the discharge, allowing them to repossess the car if payments stop or the loan terms are not met. You can voluntarily continue making payments post-discharge to keep the vehicle (known as a “ride-through” in some jurisdictions, though BAPCPA limited this for personal property), but the creditor is not obligated to accept them or report them positively to credit bureaus.

Regarding the payoff amount: To fully satisfy the loan and release the lien (clearing title), you typically must pay the **total contractual balance, including interest that accrues after the bankruptcy filing**. The discharge eliminates your personal obligation to pay post-petition interest, but the lien secures the full debt per the original contract, and creditors can require payment of accrued interest to extinguish the lien. Paying only the amount owed at filing (principal plus pre-petition interest) may not compel the creditor to release the lien, as the surviving security interest can include contractual post-petition interest until the debt is paid in full under the loan terms. If the creditor refuses to accept less, you could negotiate or seek court intervention (e.g., via a motion to compel lien release), but outcomes vary by jurisdiction and contract specifics.

Practical notes:
– In a ride-through scenario (if your lender allows it without reaffirmation), ongoing voluntary payments usually follow the original contract, including interest, to avoid repossession.
– Some lenders may agree to a reduced payoff post-discharge, but they’re not required to.
– Consult your bankruptcy attorney, as state law (e.g., on lien enforcement) and lender policies play a role. If repossession is threatened despite payments, it could violate the discharge injunction if tied to discharged personal liability.