How To Use A Reaffirmation Agreement To Keep A Car In Chapter 7 Bankruptcy
The bankruptcy law provides an exception to the above rule:if you sign a reaffirmation agreement, the lender cannot consider you indefault and repossess the car just because you filed for bankruptcy. So what is a reaffirmation agreement?
A reaffirmation agreement is a document that states that youare agreeing to be responsible for a debt after bankruptcy. So, if you sign a reaffirmation agreement forthe car loan, the agreement gets approved, and you later stop payments on theloan, the lender can sue and recover from you any money still owed on theloan. Remember that normally the lenderwould not be able to do this, because Chapter 7 bankruptcy eliminates yourpersonal liability on the car loan.
The way to ensure that you can keep a car in Chapter 7bankruptcy, then, is to sign a reaffirmation agreement, and to comply with the otherrequirements of the loan contract, which usually include making timely paymentsand keeping the car insured. If you dothese three thingstimely sign a reaffirmation agreement, keep making yourpayments, and keep the car insuredyou can keep the car after Chapter 7bankruptcy.
There are exceptions to this general approach, such as when the lender makes significant concessions on the interest rate or the principal in the reaffirmation agreement, so it is best to get competent legal advice before deciding how best to deal with a reaffirmation agreement
Your House In Chapter 7 Bankruptcy
If you file for Chapter 7 bankruptcythe kind that gets rid of debt most quicklyyou can keep your house under two conditions: Youre current with your mortgage payments when you file , and the laws in your state allow you to protect all of the equity you have in the property. By giving you relief from other kinds of debts, like credit card or medical bills, bankruptcy can free up money to help you keep up with your mortgage. Most of our readers had this experience: 68% of those who went through Chapter 7 bankruptcy were able to keep their home.
If youve already fallen behind on your mortgage payments when you file for Chapter 7 bankruptcy, youre likely to lose your house. Filing for bankruptcy lets you stay in your home another month or two, but ultimately, the bank will foreclose on the property. But if the foreclosure sale price is less than what you owe on the mortgage, your remaining mortgage debt can be discharged in bankruptcy. Our readers who lost their houses reported an average discharge of $130,000 in mortgage debt after filing Chapter 7.
Keeping Your Car With A Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is a debt consolidation program designed to help protect your property and re-establish payments with your creditors if you have fallen behind. The program offers many unique benefits that can actually help you keep your vehicle, improve your payment terms and re-establish your credit.
The Chapter 13 plan prioritizes payments to secured creditors, such as your car loan. Payments to general unsecured debts are deferred until a later time. Most often, general unsecured debts are significantly reduced or eliminated under the program . The program is designed to create a balanced budget based on your income and expenses. This means you can file bankruptcy and keep your car!
If you have gotten behind on your vehicle payments, the Chapter 13 plan can bring your account current through the debt consolidation process. The Chapter 13 bankruptcy will protect your car from a repossession. If your vehicle has been repossessed, a Chapter 13 will help you to get your car back provided it has not been sold at auction.
Improving Your Payment TermsIn short, the Chapter 13 program is a way of refinancing your vehicle as well as consolidating other debts. There are several ways that the Chapter 13 plan can improve your payment terms on your vehicle loan.
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Can You Keep Up With The Payments
If you have expensive car payments each month, and if those payments are the cause of your financial problems, it may be wise to surrender the car to the lender before you go bankrupt, even if your payments are up to date. Bankruptcy should be a fresh start, and keeping high car payments may not be a fresh start for you.
Your Ontario bankruptcy trustee can help you analyze your situation and help you decide whether or not to keep your car if you file for bankruptcy in Ontario.
Can I File Bankruptcy And Keep My Car Loan
Its completely reasonable to wonder will filing bankruptcy affect my car loan? and what happens to my car when I file bankruptcy?
Rest assured that due to Texas exemption, your car will most likely not be repossessed, and you will be able to claim the maximum amount of value of the car if you decide to sell it off. You may also redeem or reaffirm your car loan, better options for rebuilding your credit, and being in a better financial position when bankruptcy is through.
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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.
Secured And Unsecured Debt
Bankruptcy court courts looks at debt two different ways. Secured and unsecured.
Secured debt is a debt that has a lien against a piece of your property. Typical examples of secured property are a mortgage against your house or a lien on your car title.
Unsecured debts are typically credit cards, and collection accounts.
The reason why most bankruptcy filers get to keep their house or car is that the debt is secured and there is very little equity. This give us a chance to use the bankruptcy rules to your benefit.
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Reaffirming Your Car Loan
In addition to making your regular car payments, your lender could require you to “reaffirm” your car loan. Even though the car lender’s security interest in the vehicle is unaffected by your bankruptcy, a Chapter 7 discharge eliminates your liability to pay the contract price. If the lender repossesses the car and doesn’t get enough at auction to cover the outstanding balance , the lender can’t sue you for it.
The downsides to not signing a reaffirmation are that your payments won’t show up on your credit report, and the lender can take the car back for any reasoneven if you’re current on the payments.
Find Out How To Keep Your Car Under Chapter 7 Or Chapter 13 Bankruptcy
Filing for bankruptcy doesn’t mean that you’ll have to give up your car. But it’s not a given that you’ll be able to keep it either. Being able to retain your vehicle in bankruptcy depends on the amount of equity, whether you can continue paying the loan , and the bankruptcy chapter that you choose to file.
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Can I Keep The Car In Chapter 7 If I Continue Paying The Car Loan
It seems pretty straightforward to conclude that if you wantto keep your car and it has a loan on it, you will have to keep paying the loanon the car. And in some cases this isall that is required. But, in manycases, just continuing payments will not be sufficient by itself. There are two related reasons for this. The first is that many car loan contractsprovide that filing for bankruptcy is an event of default. In other words, you breach the loan contractby filing for bankruptcy, and the lender can then repossess the car. The bankruptcy law makes most such default provisionsinvalid. But, when it comes to car loancontracts, the rule is the exact opposite, and the lender can consider you indefault if you file for bankruptcy, and repossess the car even if you continuemaking your payments.
Downsides To Keeping Your House When Filing For Bankruptcy
You may desperately want to keep your house, even if youre so deep in debt youre considering filing bankruptcy. Thats understandable it not only has an emotional attachment, but could some day be an asset, even if youre behind on payments now.
That said, there are some financial downsides to hanging on to your house through a bankruptcy proceeding.
If you file for Chapter 13 bankruptcy, you have to continue making your monthly mortgage payments, as well as pay what you were behind on. This can be difficult, even if the payment plan that you, the court and your lenders agree to, seems to be doable.
Almost two-thirds of Chapter 13 bankruptcies fail. Its tough to keep to a payment plan over three to five years, even though modifications are allowed. Those involve going back to court and explaining why you need one. Through it all, you have to keep current on your mortgage payments, as well as all the other payments agreed to in the plan.
If you file for Chapter 7 and keep your house, you must make the monthly payments. The only hope for a modification, is the bank itself.
Bankruptcy, obviously, is complicated, and if youre worried about keeping your house, its even more so. If youre asking, Should I file for bankruptcy? your first move should be to talk to a credit counselor.
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What Happens To My Vehicle If I File For Bankruptcy
Many people worry about whether their car will be taken away if they declare bankruptcy.
A concern that is not altogether unfounded or unreasonable.
After all, we need our vehicles to live our regular lives.
It is also the case that some cars are repossessed or claimed by the bankruptcy trustee during this process.
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However, this certainly doesnt happen in every single case.
In fact, two main factors affect whether you get to keep your car or not.
The first is whether you own your vehicle, or if there is still an outstanding loan on it.
While the second is how much your car is worth if you do own it.
Keep reading to find a detailed rundown of both these situations and how they can play out.
You Have Other Options When You Have Car Loans
If you have an existing car loan, there are different options you can look into if you decide to keep or let go of your car after your bankruptcy filing.
1. Surrender the Car
If you cannot afford to pay your car loan, you can give back your car, which will wipe out your liability. The lender may wait for your bankruptcy filing before repossessing the car. However, they may also file a motion to the court to lift the automatic stay and get your car as soon as possible.
2. Reaffirm Your Car Loan
If you have a car loan and your equity is lower than your states Motor Vehicle Exemption, you can reaffirm your car loan. You will enter in an agreement with your creditor that you will continue paying your car loan. But you will also have to prove to the court that you can do so.
3. Sell Your Car
If your equity is much higher than what is exempted, the trustee may decide to sell your car. The proceeds will be used to pay your debts and youll get the $4,000 exempted amount.
4. Pay for the Remaining Amount
If the remaining amount after the exemption is not that high, you can pay for the remaining amount and keep your car.
5. Redeem the Car
When you owe more than what your car is worth in the market, you can redeem the car so that you can keep it. Youll have to pay the lender the lump sum of what the cars current value is.
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Learn About Exemptions Reaffirmation And More To See If You Can Keep Your Car
By Cara O’Neill, Attorney
Keeping a car in Chapter 7 bankruptcy is a top priority for almost all filers. Your ability to do so will depend on:
- the vehicle equity
- the exemptions available to you to protect it
- if you’re current on your payment, and
- whether you can stay current after bankruptcy.
Learn more about property in bankruptcy.
What Are Chapter 7 Bankruptcy Exemptions
The purpose of bankruptcy is to help people get back on their feet and regain control of their financial situation. In order to help with this process, the government created a set of exemptions to help individuals maintain their quality of life, while still resolving their issues with creditors.
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How To Avoid Losing My Car
While nothing can be guaranteed in a Chapter 7 bankruptcy filing, the best way to ensure you have done everything possible to keep your car is to consult with an experienced lawyer. The lawyers at Cravens & Noll Bankruptcy Law Group have years of experience in protecting you and your property.
Are you concerned about losing your car while filing? Contact us now for your initial bankruptcy consultation.
Ch. 7 Bankruptcy Lawyer Info
Exemptions For Your Home
In British Columbia, homeowners exemptions are higher if you live in Vancouver or Victoria. In this case, $12,000 of the equity in your home is protected in Greater Vancouver and the Victoria capital area. Elsewhere in the province, $9,000 in home equity is exempt from bankruptcy. For more information on bankruptcy exemptions in British Columbia, you can request a call from a local Licensed Insolvency Trustee.
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Contact Our Bankruptcy Lawyers In Nevada
Are you thinking about filing for bankruptcy? Are you worried about keeping your vehicle? Our Las Vegas bankruptcy attorneys can help. We can help you understand what you can do to keep your car, and we can help you take the right steps to save your vehicle from bankruptcy. Call us today to begin working on your case.
Can You Keep Your Car If You File For Bankruptcy
There are two types of bankruptcy. In Chapter 13, you propose a repayment that allows you to repay your debt over time. If the court approves your Chapter 13 plan and you keep making the car payments, then you can keep the car.
In a Chapter 7 case, your ability to keep your car depends on several factors. Filing for Chapter 7 creates a bankruptcy estate, and state law determines what assets you get to keep when you file bankruptcy. Equity in at least one car can often be protected, but you need to review the laws of your state.
If you own the car outright, the value will determine if it can be protected. In California for example, you can protect about $2800 of the value of your vehicle. If you own a car free and clear that is worth $10,000, the chapter 7 trustee might decide to sell it and give you the $2800. Even if your equity exceeds the value of exemption, the trustee could also decide there is not enough equity in the vehicle to be worth selling.
If you owe money on the vehicle and wish to keep it, you have two choices: reaffirmation or redemption. Reaffirmation is an agreement with the lender to keep making payments, and you agree not to receive a discharge of the debt for the car. Redemption is when you purchase the car outright for what you owe on it, which is difficult to do if you don’t have the cash or someone willing to lend it to you.
The bottom line is that you need to consult a local bankruptcy attorney who knows your state’s exemption laws.
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If You Have A Car Loanyou Keep The Car
Most of us tend to think then when you go bankrupt, you lose everything. In Canada, reality is often a little different. This reality begins with secured debts. If you pledged something as security for loan, the asset that provides collateral for the loan is exempt from bankruptcy. It survives bankruptcy. So if you have a car loan, and your car or truck is collateral for the loan and you file for bankruptcy, the loan and the vehicle are both kept out of the bankruptcy.
If you want to get out of your car loan, you would need to make arrangements to sell the vehicle with the lender or finance company that holds the loan. When the vehicle is sold, the proceeds would be used to pay off the loan.
If the vehicle sells for less than the loan amount, you would still owe the remaining balance. However, this outstanding balance would then be an unsecured debt and could be included in your bankruptcy if all this transpired before you declare bankruptcy.
Newfoundland & Labrador Bankruptcy Exemptions
In Newfoundland and Labrador, 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 $4,000 on the loan, the equity you have in the car is $2,000. In Newfoundland and Labrador, the exemption for a car is $2,000. In this case, you would be entitled to keep the car and your unsecured creditors cannot take this from you when you file for bankruptcy.
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