Essentially, you agree that the debt goes on after the bankruptcy with the same contract terms. The finance company retains its lien, and you will be personally liable for the debt. The main requirement is that you are current or close to current on your payments. Generally, the finance company wants proof of Physical Damage Insurance. Remember, the finance company wants your money not your car. There is a disadvantage to reaffirming a debt. If, after the Bankruptcy is over, you fall behind on the payment the finance company can repossess the car and hold you liable for any deficiency. This is the same as before a bankruptcy. Similary, if you have an accident, the insurance company pays the value of the car and you are liable for the rest.
Some folks decide the car is not worth keeping and paying for it. This is a great option if you come to that decision. Most cars are worth much less than the balance owed on the loan. You will get a discharge of the debt: you owe nothing.
If your car is worth less than what's owed, you can save money by paying the retail value of the car and discharging the rest of the debt. Assume you owe $17,000 and the car is only worth $8,000, you can redeem by paying $8,000.
REDEMPTION, PART II
You usually have just a month or two to come up with the $8,000 so redemption by itself is often not a realistic option. There are a few companies that finance the redemption. This allows you to come out of bankruptcy with lower payments. Will you qualify? That is up to the redemption financing companies. But there is no harm in applying to them.
REDEMPTION, PART III
Some companies that finance redemption also offer the option to give up your car and replace it with a more affordable car. Again, you often come out of bankruptcy with a lower payment because the loan is for the car's value, not thousands more.
Additional resources provided by the author
If you are considering filing Bankruptcy and have a car note you should consult with an experienced lawyer who concentrates in Consumer Bankruptcy. Bring as many documents from the finance company and letters when you consult with your lawyer.