There are many factors in deciding whether to file a Chapter 7 or chapter 13 bankruptcy. One factor favoring the Chapter 7 is the discharging of unsecured debt, rather than a repayment plan. There is also the option of returning or keeping collateral from a secured debt, such as a car to a loan.
Many creditors are unwilling to enter into a new agreement if the creditor is behind on payments. However, is you are current on your car payments, then you will need to sign a reaffirmation agreement to keep it, or face the possibility of a repossession after the chapter 7 automatic stay has ended.
The reaffirmation agreement is a new contract, which states the amount outstanding and the previously agreed to interest rate and payments. After both parties have signed the agreement, it is filed for the judge’s approval. There is a possibility of negotiating the terms of the reaffirmation agreement.