Here Are Options Provided Under Chapter 1:
- Reduce the car loan
You can be able to adjust the loan terms in your favor of paying off the value of the car rather than the balance.
- Continue making car payments
Youre given the freedom to continue making car payments even outside the loan terms of your Chapter 13 repayment plan.
- Surrender the car
You can choose to give the car to the lender if you dont wish to keep it. This allows you to remain in a less balance that you can pay off easily in your repayment plan.
- Pay your nonexempt equity in your payment plan
You can pay for your nonexempt in the repayment plan if you wish to keep your car.
Can A Bankruptcy Trustee Take My Home
Itâs not common, but itâs possible in certain circumstances.
The bankruptcy trusteeâs job is to sell non-exempt property for the benefit of unsecured creditors. That includes personal property and real property. Whether your home is safe from the trustee depends on whether it has any ânonexempt equityâ which in turn depends on its market value.
As a reminder, hereâs how we calculate equity in this scenario:
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What Does It Cost To File For Bankruptcy
The Bankruptcy Court collects a fee to file a bankruptcy petition. It now costs $299 to file for bankruptcy under chapter 7 and $274 to file for bankruptcy under chapter 13, whether for one person or a married couple. The court may allow you to pay this filing fee in installments if you cannot pay all at once. If you hire an attorney to represent you in your bankruptcy case you will also have to pay the attorneys fees you agree to.
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Filing Bankruptcy When You Own The Car
A car loan is a secured debt, which means the car is collateral that can be taken back by the lender if you dont pay. When you file for Chapter 7 bankruptcy, you must list your assets on a form called Schedule A/B. Your car is an asset, because it has value. You must also file a statement of intention that that tells the court whether you plan to reaffirm your car loan, redeem the car or surrender it. If the statement of intention isnt filed within 30 days of when the bankruptcy is filed, the car loan is no longer part of the bankruptcy proceeding.
The first step to keeping your car if youre considering bankruptcy, is to determine its status. Youre either paying a loan, leasing or you own it free and clear. The status determines what you have to do to keep your car.
If youre making monthly payments on a car, its either a loan or a lease. If youre not sure which, check your agreement. If its a lease, you are renting the car and there are mileage limits that add costs when the lease ends and you return the car to the dealer.
If you are making monthly payments on a loan, the lender holds the title as collateral. Once youve paid for the car, you get the title and own it free and clear. If you cant make payments, the lender takes back the car back, which is repossession.
Being up to date on your car payments before you file for bankruptcy makes it much more likely youll keep your car when you file for either Chapter 7 or Chapter 13.
What Happens To My Car Or Vehicle When I File For Bankruptcy
Auburn Bankruptcy Attorneys
Stop your vehicle repossession now! Filing for bankruptcy and your car.
What happens to my car or truck when I file for bankruptcy? How can I stop a car or property repossession?Your car in bankruptcy
When many of our Auburn bankruptcy clients first contact our offices, they are very concerned about losing their vehicle. And, rightfully so. How can you even get to work without a car? Unfortunately, thereâs a lot of confusion out there regarding filing for bankruptcy and what happens to someoneâs care when they do so. Hereâs what you need to understand.
If you can afford to keep making your payments after wiping out your creditors, bankruptcy is often one of the most effective ways to keep your car from being repossessed. Bankruptcy offers ways to shed debt while holding on to one of your most important assets your car. If you are making payments on a car, you can usually keep the car in bankruptcy so long as you keep making the payments. Bankruptcy can also offer ways to restructure your payments to make them more affordable, Most importantly, filing for bankruptcy improves your monthly cash flow to make payments easier to handle.
The redemption option involves paying off the balance of the car loan at the value of the car. This option makes sense if the car is worth a lot less than the loan balance. Some finance companies can loan you money while you are in bankruptcy to redeem the car.
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Should I Purchase A Car Before Filing Bankruptcy
Clients often purchase vehicles before filing bankruptcy. Often this additional, necessary expense allows a client to pass the Means Test for a Chapter 7 or lower a Chapter 13 monthly plan payment.
A car loan is a secured debt as it is secured by the vehicle to which it is attached. Clients often assume that their loan is secured when they drive their new car off the lot. However, the creditor must perfect the lien by filing it with the Department of Motor Vehicles in order to provide third parties notice of the lien on the vehicle. In order to properly perfect the lien, it must be filed within thirty days after the purchase of the vehicle.
If the lien is placed more than thirty days after purchase of the vehicle, and a bankruptcy case is filed within ninety days from the date of the placement of the lien, the Bankruptcy Trustee has the power to strip the lien and sell the vehicle. A client going into a Bankruptcy generally needs their vehicle to get to and from work, school, medical appointments, or other important destinations, and obviously, losing their new vehicle would be a substantial blow to their wellbeing and livelihood. A knowledgeable Bankruptcy attorney is always on the lookout for this situation and will likely advise a client to wait ninety days from the placement of the lien before filing their Bankruptcy case.
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Who Is Eligible For The Homestead Exemption And How Do You Claim It
Eligibility for the Florida homestead exemption is almost as generous as the exemption itself. To claim this unlimited-value exemption, youll need to be able to prove that this property if your familys primary residence. You will also be required to demonstrate the fact that you have owned this property for at least forty months.
It is important to note that filing for chapter 7 bankruptcy in Florida will not stop the bank from collecting on your home loan if it is past due. If you intend to file for chapter 7 bankruptcy in Florida, you will first need to ensure that you are current on your house payments. Otherwise, your property may not be eligible for this exemption and your property may be surrendered in the agreement.
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Automobiles And Motor Vehicles
You have several choices for keeping your car a Chapter 7 bankruptcy.
After you have filed the bankruptcy. the first option is to continue making payments on the auto loan. Whether you owe more than the car is worth or less than the car is worth, the car finance company really only cares about getting paid. So as long as you are making payments they will allow you to keep the car. This is called pay-as-you go. The main advantage of pay-as-you-go is that if you have financial trouble after the bankruptcy is over, you can turn the car back to the finance company without any consequences. Since you are not technically required to pay anything on the loan there is no consequence to stopping paying other than giving the car back.
The second option would be to file whats called a reaffirmation agreement. A reaffirmation agreement says even though I do not owe this debt anymore due to filing bankruptcy, I agree to remain liable for the debt owed on the car. This is not always the best solution but it does have some advantages. The biggest advantage is that if you reaffirm a debt it continues to be reported that on your credit. So it drives your credit score up earlier and faster than if you just pay-as-you-go. The main disadvantage to filing a reaffirmation agreement is that if you do have financial trouble after the bankruptcy is over then you are liable on this debt.
Car Loans During Bankruptcy
There is another advantage to having a car loan during bankruptcy, as well as just getting to keep your vehicle.
It is that it can help to improve your credit too.
Of course, this can be valuable, indeed.
The reason being that bankruptcy can harm your credit rating for 7-14 years after its completed.
Therefore, by keeping your loan open and paying it regularly and on time, you can help to minimise the damage to your credit rating and get back to financial normalcy faster.
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Pay And Drive In Bankruptcy Law
You may have heard of the concept of pay and drive in bankruptcy law. The law allowed drivers to keep their vehicles as long as they stayed current on payments. Pay and drive hasnt been a part of bankruptcy law since 2005. You must pursue one of the other options to keep your vehicle in a Nevada bankruptcy.
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Let An Attorney Help You Keep Your Home After A Bankruptcy
The decision to declare bankruptcy often comes at an overwhelming time of your life. If youre thinking about declaring bankruptcy, the chances are that youre worried about how you can manage all your finances now and in the future.
If youre caught in a financial tailspin a professional can help you identify the right steps to take, even if youre facing the prospect of losing your home.
Contact a local bankruptcy attorney, who can help develop a personal plan to get your balance sheet back out of the red.
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Reaffirming The Car In Bankruptcy
Most motor vehicle creditors will require an individual to sign a Reaffirmation Agreement on the vehicle to be filed with the court. Signing this document essentially puts you in the same position with your obligation as before you filed. Reaffirming on a motor vehicle is also a useful tool to begin the process of rebuilding your credit. You can also choose to redeem the car by paying the lender the current market value in one payment.
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Find Out What Happens To Your Car The Equity In Your Car And Car Loans In Bankruptcy
One of the benefits of bankruptcy is that you can get out from under an oppressive car loan or lease. And, unless you have an expensive luxury car that you own outright or a valuable antique, it’s not likely that you need to worry about losing the car in bankruptcybut that’s not always the case.
Your particular options will depend on whether you file a Chapter 7 or Chapter 13 bankruptcy. Keep in mind that under either chapter, you’ll have to pay the car loan if you want to keep the vehicle. But in some instances, you might be able to pay something less than what you owe.
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What Happens To Your Car In Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy can clear some unsecured debts, but it may also require selling or giving up some assets to pay debts. The items that are exempt from liquidation, and the value that can be exempted, varies by state.
If you file for Chapter 7 bankruptcy and local bankruptcy laws allow you to exempt all of the equity you have in your car, you can keep the vehicleas long as you’re current on your loan payments. And if the market value of a vehicle you own outright is less than the exemption amount, you’re in the clear.
To determine how much equity you have in the vehicle, subtract your current loan balance from the car’s value. Because vehicles tend to depreciate in value fairly quickly, you may not have much equity unless you’re nearing the end of your loan term.
Once you’ve determined how much equity you have in your vehicle, take a look at what the motor vehicle exemption is in your state. If you have less equity than the exemption limit, the car is protected. For example, if your state’s exemption limit is $4,000 and you have $3,500 in equity in your vehicle, you can keep it.
If the equity in your car exceeds the exemption limit, a few different things can happen.
Reaffirming Your Car Loan
Once your bankruptcy is completed, your lender may require that you reaffirm your car loan. This is because once your bankruptcy is finished, your original car loan will be wiped out and you wont be responsible for making payments. Most car lenders require this loan reaffirmation, and it is one way the lender is protected if you default on the loan once again.
Those who file Chapter 7 must indicate they plan to reaffirm their car loan on the statement of intent form . Your lender has to agree to reaffirmation as does the judge. Depending on the circumstance, a lender who agrees to a reaffirmation plan will send an agreement to either your attorney or the judge. Your attorney must approve your plan for reaffirmation.
If you should default on the loan again, another Chapter 7 filing wont be an option for you. You cannot file Chapter 7 again for eight years following the discharge of a Chapter 7 filing.
Even when your car is worth more than the exemptions you are entitled to, the trustee may decide not to sell your car so that you can continue to go to work and fulfill your obligations.
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If You Have A Car Loan When Filing Chapter 7 Bankruptcy You Must Do This
Make sure your car payment is current before filing for Chapter 7. If you don’t have a car loan, you can skip this step. But if you have a car loan, the following information is crucial.
If you’re behind on your vehicle payments, the lender can take back the car, even if you’re in bankruptcy and an exemption protects your equity. Why? Because the car secures the loan.
If you don’t pay as agreed, the lender can use the lien rights to recover the vehicle by doing the following:
- filing a motion asking the court to lift the automatic stay so the lender can pursue repossession, or
- repossessing the car after the court issues the bankruptcy discharge and closes the case.
If you’re behind on payments, you might have another optionredeeming the car. But it can be costly.
You redeem a vehicle by paying the lender the car’s market value in one lump sum payment, so if you owe more than the car is worth, this can be a good way to go. Many people ask friends or family for help or use a lender specializing in bankruptcy redemptions.
Will A Chapter 13 Bankruptcy Protect My Car
Chapter 13 bankruptcy allows for a reorganization of your debts. For those wishing to protect their vehicle, the benefits of filing for Chapter 13 bankruptcy include:
- The potential for lower monthly payments and interest rates
- The ability to repay both past due and current payments over an extended period
- The ability to potentially keep your car even with overdue payments
- The ability to get your car back after repossession if it has not yet been sold
Chapter 13 can offer you more financial flexibility by allowing you to pay off your debts over an extended period. This can allow for more room to pay off your car payment.
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How Chapter 13 Works
Under Chapter 13 bankruptcy, you, your creditors, and the court will collaborate to work out a payment plan. The process is somewhat complicated, but youll generally be able to continue to make your car payments. If you have arrearages on your auto loan, youll be able to make those up through your plan payments, too. Chapter 13 debtors usually pay off their cars over the course of the plan.
Chapter 13 Repayment Plans
If you file for Chapter 13 bankruptcy, you can continue making your payments according to their terms or add the payments into your payment plan. If you owe more than the car is worth, or if your interest rate is high, you can alter the terms by paying only what the car is worth and at a reasonable interest rate over the length of the plan, usually three to five years. This is called a “cramdown,” and it’s used every day to help people like you keep their cars despite filing for bankruptcy.
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