What happens if a person, who does not file for bankruptcy, jointly owns an automobile with a person who has filed for bankruptcy (debtor). The law is the same no matter the relationship between the filing (debtor) and non bankruptcy filing person (ie, friend, son, spouse).
In virtually every case, the debtor is permitted to keep his auto, from the sale of the trustee. Therefore, for this blog, we will assume that the auto does not have substantial value, and the debtor is permitted to keep the auto.
The state law, and not the bankruptcy law, applies to the non filing joint owner. This means that if the payments are current, the non filing person would be able to keep the auto, as if no bankruptcy was filed. The right of the non filing owner to keep the auto will not change no matter what information the debtor provided on his petition, with the exception of fraud. Also, the bankruptcy filing would not modify any terms of the financing.
As long as the payments are made on a timely basis, by any means, the finance company could not repossess the auto. Conversely, if the auto payments come into default after completion of the case and discharge, the finance company can always repossess the auto.
Also, if all required finance payments are made, by any means, or by any person, both individuals would own the auto jointly, after completion of all payments. Per state law, if the the auto payments are in default, the finance company could repossess the auto, sell the auto, and sue the non-filing individual for the deficiency that is due.
No information stated above would change the law relating to the non filing person, whether or not the debtor signed a reaffirmation agreement. However, if the debtor signed a reaffirmation agreement, and the payments fell in default, the finance company would be permitted to repossess the auto and sue both the debtor and non filing individual, for the balance due after auction. If the payments are in default, after the completion of the case and the debtor did not reaffirm the debt, the finance company would not be permitted to sue the debtor, as the debt would have been discharged.
Robert Manchel is an experienced New Jersey bankruptcy practitioner and will answer your questions by calling (866) 503-5655.