Debts Never Discharged In Bankruptcy
While the goal of both Chapter 7 and Chapter 13 bankruptcy is to put your debts behind you so that you can move on with your life, not all debts are eligible for discharge.
The U.S. Bankruptcy Code lists 19 different categories of debts that cannot be discharged in Chapter 7, Chapter 13, or Chapter 12 . While the specifics vary somewhat among the different chapters, the most common examples of non-dischargeable debts are:
- Alimony and child support.
- Certain unpaid taxes, such as tax liens. However, some federal, state, and local taxes may be eligible for discharge if they date back several years.
- Debts for willful and malicious injury to another person or property. âWillful and maliciousâ here means deliberate and without just cause. In Chapter 13 bankruptcy, this applies only to injury to people debts for property damage may be discharged.
- Debts for death or personal injury caused by the debtorâs operation of a motor vehicle while intoxicated from alcohol or impaired by other substances.
- Debts that you failed to list in your bankruptcy filing.
Secured Car Loans Or Leases And Bankruptcy
If you lease a car, or there is a loan or lien registered against your vehicle, and if the loan is for as much as the vehicle is worth, the trustee wont take your vehicle. You have two choices:
Debts That Are Difficult To Discharge In Bankruptcy
Student loans are notoriously difficult to discharge through bankruptcy it is only possible if you can demonstrate undue hardship to yourself or your dependents, such as being unable to maintain a minimal standard of living. In some cases, a court may discharge part, but not all, of your student loan debt. If student loan debt is a major reason for your considering bankruptcy, contact your loan servicer first and see if itâs possible to negotiate a repayment plan that would work for you. In the case of federal student loans, for example, several repayment plans are available.
You cannot have income tax debts discharged without a special exemption, which can only be obtained by petitioning the bankruptcy court and explaining why you deserve relief. So if you have income tax debts that you cannot repay, then you may be better off consulting with a tax attorney to discuss your options before filing for bankruptcy.
In the case of federal taxes, for example, the Internal Revenue Service can offer several alternatives to people who are unable to pay what they owe. One is an offer in compromise, in which the IRS agrees to accept a lesser amount. The IRS may also arrange for a payment plan, or an installment agreement, that will allow you to pay your taxes over an extended period of time.
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Can I Keep My Car If I File Bankruptcy In Texas
For most people in the State of Texas, a vehicle is necessary to get to work, to school, to the store or to see family and friends. In fact, the widest distance from one point of the Lone Star State to another has been measured at a staggering 800 miles! Around here, you need a car to get around.
For this reason, Texans considering filing for bankruptcy due to hard times have legitimate concerns that the loss of their vehicle might make times even harder. However, claiming bankruptcy and keeping your car is very possible, because Texas has some of the most generous legal protections available.
The trusted Houston Bankruptcy Attorneys at the Law Offices of Kretzer and Volberding P.C. can help you understand how to declare bankruptcy and keep your car, as well as get back on the road to financial recovery.
Does It Depend On The Type Of Bankruptcy
The type of bankruptcy you go with will significantly affect what happens to your car. If you file for Chapter 7, youll be able to keep your vehicle as long as local bankruptcy laws exempt all your equity and youre up to date on your loan payments.
To figure out how much equity you have in your car, take your loan balance and subtract it from the value of your car. Note that if youre close to the end of your term, you may not have a lot of equity as vehicles depreciate quickly.
After you know how much equity you have, find the motor vehicle exemption in your state. If you have less equity than the exemption limit, you shouldnt have any issues keeping your car. Because Chapter 13 involves a debt repayment plan and doesnt liquidate assets to repay creditors, your property wont be sold. This means if you own your car, it will likely be yours to keep.
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Can I Keep My Car If I File For Bankruptcy
We find a common question people ask is Can I keep my car if I file for bankruptcy? They want to know what happens to your vehicle if you declare bankruptcy. Will you lose your car in the process or will the bankruptcy trustee take it? What can you expect? The answer basically depends on two things: 1) is there a loan on the car, and 2) if there is not a loan, how much is the car worth?
Debt Relief Alternatives To Bankruptcy
Bankruptcy has serious consequences. A Chapter 7 bankruptcy will remain on your for 10 years, and a Chapter 13 will remain for seven years. That can make it more expensive or even impossible to borrow money in the future, such as for a mortgage or car loan, or to obtain a credit card. It can also affect your insurance rates.
So itâs worth exploring other types of debt relief before filing for bankruptcy. Debt relief typically involves negotiating with your creditors to make your debts more manageable, such as reducing the interest rates, canceling some portion of the debt, or giving you longer to repay. Debt relief often works to the creditorâs advantage, too, as they are likely to get more money out of the arrangement than if you were to declare bankruptcy.
You can negotiate on your own or hire a reputable debt relief company to help you. As with , there are scam artists who pose as debt relief experts, so be sure to check out any company that youâre considering. Investopedia publishes a regularly updated list of the best debt relief companies.
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Bankruptcy Exemption Limits And Your Car
Second, if there is no car loan, you can keep the car if it is under the allowable exemption limits for your province. Each province has different exemption limits, so you should consult a local bankruptcy trustee to more information.
In most provinces the exemption limit is around $5,000 $7,000, so if a car with no loans is worth less than that, you would be allowed to keep it. If the appraised value of the car is greater than the exemption limit,you could keep the car, but only if you pay into your bankruptcy estate the non-exempt portion.
There are other factors to consider and each case is unique, so I suggest you for a no charge initial consultation to determine your options for keeping your car if you file bankruptcy.
New Brunswick Bankruptcy Exemptions
In New Brunswick, property exempt from seizure in bankruptcy is set by the provincial government and applies to the equity in an asset. Equity is the difference between the value of the asset and what you owe on the asset.
Example: If you have a car worth $6,000 and you still owe $3,000 on the loan, the equity you have in the car is $3,000. In New Brunswick, the exemption for a car is $6,500. In this case, you would be entitled to keep the car and your unsecured creditors cannot take this from you during the bankruptcy process.
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What Happens To Your Car In Chapter 13 Bankruptcy
Another form of bankruptcy is Chapter 13, which works a bit differently from Chapter 7. Rather than liquidating non-exempt assets to repay creditors, you’ll enter a debt repayment plan. Your property isn’t sold off with this form of bankruptcy instead, your finances are reorganized and you’ll begin the process of repayment. If you own your car outright you’ll be able to keep it.
You will have a repayment period of either three or five years, and once that period ends, some remaining debts can be dischargedmeaning you don’t have to pay them anymore. Not all debts can be discharged, however. Credit card and medical debt can be discharged, for example, but mortgages and student loans cannot.
When you file Chapter 13 bankruptcy, your debt is grouped into three buckets:
- Priority debts: These must be repaid in full. This includes bankruptcy costs, unpaid tax bills from the past three years, and child and spousal support.
- Secured debts: Car loans are included in this category. If you have a car loan, the amount you owe on it may be reduced in the Chapter 13 bankruptcy process if you owe more on it than its current value. Also, if you can qualify for a repayment plan and get caught up on your loan, you may be able to keep the vehicle.
- Unsecured debts: These will be discharged in the bankruptcy after you’ve completed your repayment plan.
Bankruptcy Exemptions On Prince Edward Island
- No limit on clothing for you and your family
- No limit on medical or health aids
- Any motor vehicle needed for transportation to work up to $6,500, or up to $3,000 if not used for work
- Household furniture, utensils, equipment, food and fuel up to $5,000
- Tools used by you in your business or trade, up to $2,000
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What If You Owe More Than Fair Market Value Or You Cant Afford The Payments
If you have a significant shortfall on your car, it may be prudent to simply surrender the car to the lender when you go bankrupt so that you are not overpaying for the vehicle. If you think your car loan or lease is too expensive, and you cant afford to keep up with your payments, you have the option of handing back the vehicle to the lender.
In either case, you must return the vehicle to lender before you file. If you do surrender the car to the secured lender, any resulting shortfall after they sell the vehicle is eliminated as part of your bankruptcy.
In rare circumstances, people sometimes offer their vehicle as collateral for a larger consolidation loan. This is slightly more complicated however a trustee can walk you through options that can help you keep the vehicle if that makes sense.
Here’s An Overview Of Your Options If You Want To Keep Your Car In Chapter 7 Bankruptcy
By Cara O’Neill, Attorney
You don’t have to give up all of your property when you file for Chapter 7 bankruptcy. If you own a car, you’ll likely be able to protect a particular amount of the vehicle’s equity . If the equity value is worth more than you can protect, the bankruptcy trustee assigned to your case will likely sell it and distribute the nonexempt proceeds to your creditors.
Additionally, if you owe money on the car and would like to keep it, your loan will need to be current, and you’ll need to be able to continue making payments after the bankruptcy case. Also, you must indicate to the court whether you intend to reaffirm the debt, redeem the car, or surrender the car .
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Bankruptcy Lawyers Serving Arlington Heights Libertyville And Chicago
One issue that concerns many people before they file for bankruptcy is whether the court will let them keep their car. The answer depends, first, on whether the person owes any money on the car. If they paid off their car loan, then they get to keep the car as long as its value does not exceed the state’s vehicle exemption. If the person still owes money on the car, then that may complicate the issue. People in that situation can choose to either walk away from the car or keep making payments on it.
Do You Lose Your Car If You File For Bankruptcy
The good news is you dont automatically lose your car if you file a bankruptcy or consumer proposal in Canada.
If you financed your car, truck, van or any vehicle with a loan or lease, then when you file for bankruptcy in Canada, you can keep your vehicle as long as you continue to make the monthly payments.
The key here is you must continue with your obligations under the loan or lease agreement. Your lender or leasing company can repossess the vehicle if you dont keep up with the required payments.
Your creditor cant demand the vehicle back just because you filed personal bankruptcy. Even if your loan or lease contract contains a clause that says your lender can demand full payment, cancel the lease and take the vehicle back if you become bankrupt, this clause is unenforceable.
Specifically, the Bankruptcy & Insolvency Act provides a stay of proceedings against such actions.
Section 69 prohibits secured creditors from taking possession of assets under a security agreement just because you filed insolvency unless:
- They repossessed the vehicle before you filed
- They gave notice of their intention to take possession 10 days before you filed
- You give them permission to take the car back
If you can continue to make your monthly payments, the leasing company, bank or car lender cant cancel your vehicle lease or demand full payment of your car loan.
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Protecting Your Car’s Equity
When you file bankruptcy, you won’t be left destitute. Each state decides which property its residents can safeguard with bankruptcy exemptions. The state’s exemption list will cover key assets that you’ll need to maintain a home and job, such as clothing, household goods, electronics, work tools, retirement accounts, and, in most cases, some equity in a homestead and equity in a vehicle.
Exemption amounts vary by state. Even so, because most people don’t own high-status items such as recreational vehicles, boats, and luxury cars, bankruptcy debtors can often protect allor at least mostproperty in bankruptcy. What happens to nonexempt property will depend on the bankruptcy chapter filed.
What Happens To My Car If I File Bankruptcy
Very few people who declare bankruptcy in Canada lose their vehicle. You need your car to get to work, so losing your vehicle is not an option. All provinces have laws that exempt one car or truck worth up to a certain dollar limit from seizure by the trustee. To find what happens to your car after you file bankruptcy, we look at two key questions:
The first question that you will be asked is what is your car worth? To determine this youll need to have the vehicle appraised. Most trustees will accept an independent value of opinion that is, the opinion of someone who is qualified to sell cars or value cars, that is not related to you or a friend, that is willing to write out a letter indicating what they believe the fair market value of your car is. Fair market value is the amount that someone would pay for your car.
The second question will be is your car financed or do you have clear title to your car? Clear title means that there are no liens or other claims to your car. A lien is the technical term for pledging your car as security for a debt. In other words, is your car financed, leased or has another creditor placed a secured charged against your vehicle.
If you file bankruptcy, there are options that can allow you to keep your vehicle no matter its value. You can also choose to keep, or hand back, a leased or financed vehicle depending on what makes the most sense for you financially.
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Repair Your Credit Fasterif You Go Bankrupt Keeping Your Car Loan Could Help
While this article is just a quick overview of some of the ins and outs of bankruptcy, if youre thinking of going bankrupt, you have a car loan, and you want to keep your car, keeping up the car loan payments through your bankruptcy and after it will help to improve your credit. Bankruptcy is one of the worst things you can do to your credit, and it takes many years for your credit to recover. However, if you have a debt like a car loan that it is being paid as agreed and it keeps reporting on your credit report during and after your bankruptcy, this will help to rebuild your credit more quickly after the bankruptcy.
Can I Keep My Home
We understand that your house is likely your most valued possession. There are exemptions that allow you to keep some of the equity in your home when you file for bankruptcy. Generally speaking, however, if youve already paid off a large portion of your mortgage , filing for bankruptcy might not be the best solution for youthe law requires you to use that equity to pay off some of the money you owe to your creditors.
To keep your home after filing a bankruptcy, you would need to pay a Licensed Insolvency Trustee the amount of home equity you haveminus any provincial exemptions. Home equity is calculated by subtracting the remaining amount of your mortgage, along with any outstanding taxes you owe, from what your house is currently worth on the market. For example:
For example: Current market value of Bobs home: $150 000
|Bobs estimated home equity||$19 400|
Depending on which province he lives in, Bob would have to pay up to $19,400 during the bankruptcy process in order to keep his home. This is one of the reasons why bankruptcy is only considered after other debt relief solutions have been explored. If Bob can afford to repay a portion of his debt, but not the full amount of equity in his home, he may wish to consider an alternative to bankruptcy, such as a consumer proposal. A Licensed Insolvency Trustee will be able to explain every option to help Bob choose the best solution that is right for him.