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.
Bankruptcy And A Personal Injury Case
When you submit a bankruptcy filing to the court, everything you own becomes part of your bankruptcy estate. Practically, this means that all of your possessions, intangible assets, and any property youâre entitled to become part of your bankruptcy estate on the date you file for relief. Whether youâve already filed a personal injury case or youâre still thinking about filing an accident case, the value of that legal claim will be considered part of the estate because you technically became entitled to any settlement you may reach when the accident occurred. If you file a personal injury claim, the bankruptcy trustee assigned to your case will evaluate its potential value and determine whether to pursue the claim on behalf of your creditors. The trustee is even empowered to agree to a settlement amount.
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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Goods Bought On Hire Purchase
If you have goods you’re paying for on hire purchase, there will normally be a clause in the agreement which lets the hire purchase company end the agreement if you become bankrupt. If this happens, you may have to return the item.
If you want to keep the goods, you may be able to persuade the hire purchase company not to cancel the agreement and ask the trustee if you can carry on making payments. However, the trustee may also take the goods and sell them.
Keeping Your House Or Car In A Chapter 13 Bankruptcy Case
Chapter 13 is a special type of bankruptcy. It is a repayment plan where you pay a small portion of your debt over a period of time. Typically, 36 months, but this going to run up to 60 months. One of the features of chapter 13 bankruptcy is the ability to catch up and make payments inside the plan period. So, for example, if you miss 10 mortgage payments you could make those up over 36 months.
Chapter 13 also allows you to cram down certain debts. It can make it possible to remove second mortgages on your house or make it so that you are only paying the actual value of your car as opposed to what you actually owe on the car
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What Kind Of Debt Is A Vehicle Lease
Most people understand that a car loan is a debt, but what about a lease?
A car lease is a financial agreement between you and the car leasing company to pay for the cars use over a specific period. The car lessor owns the vehicle, and in exchange for the right to use the vehicle, you have fixed monthly payments for the duration of the agreement. Since you legally owe money under contract, you have a debt equivalent to the remaining payments.
When you file for bankruptcy, all your debts need to be listed, so if you have a vehicle lease, you need to notify your trustee.
Most debts in Canada fall under two categories: unsecured and secured. Unsecured debts include credit cards, lines of credit, or payday loans, for example. Vehicle loans, mortgages and any other debts tied to an asset are secured debts.
Vehicle leases are secured debts because the leasing company has a secured interest in the asset. While the debt will be listed on your Statement of Affairs as a secured debt, it is not dischargeable by bankruptcy.
What Happens To My Car During Bankruptcy
Filing for bankruptcy is a serious decision that can damage your credit for seven or 10 years, depending on the type of bankruptcy. But if you’re drowning in debt you can’t pay, it can serve as a last resort to help you hit “reset” on your finances.
There are two main types of bankruptcy: Chapter 7, which liquidates some of your assets, and Chapter 13, which focuses on repaying debts. What happens to your car in bankruptcy depends both on the type of bankruptcy you file and how much equity you have in your vehicle.
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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.
If I File Bankruptcy What Happens To My Car In Texas
The main point to understand is that a vehicle loan, unlike credit card loans and most personal loans, is something called a secured debt. This means the vehicle itself backs or secures the value of the loan, by serving as collateral for the loan. If the borrower is unable to make payments on the car loan, the lender traditionally has the right to repossess the vehicle.
Enter bankruptcy, a unique federally-created protection for many kinds of personal property in the State of Texas, which stays or places on hold most types of collection activities and lawsuits, including vehicle repossession. While bankruptcy is ongoing, a vehicle repossession generally cannot take place without the permission of the judge overseeing the case.
In Texas, there are several options for filing bankruptcy and keeping your car, motorcycle, SUV, or other personal vehicle. If you take no actions on your vehicle loan when you file for Chapter 7 or Chapter 13 bankruptcy, you may be relieved of your obligation to repay your car loan afterward, and your car also will most likely not be repossessed.
You may also redeem or reaffirm your car loan, potentially better options for rebuilding your credit and recovering from bankruptcy, both of which we discuss below.
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When Your Car Payments Are Not Current
If you have not kept up with your payments on a car, you may still be able to redeem the car if you can afford to do it. Alternatively, you can try to reach a reaffirmation agreement with the lender that will integrate the overdue payments. However, the lender has a right to take away your vehicle if you are not current on your payments when you file under Chapter 7, unless you can redeem the car.
Consider The Equity You Have In Your House
Don’t worry, Chapter 7 filers, there are still ways you can keep your house. When deciding whether your house is exempt under Chapter 7, the trustee only considers the equity in your house.
Equity is the market value of your house minus the balance on your mortgages or home equity loans. Many bankruptcy filers have little or negative equity in their houses, so their houses are exempt and need not be sold in the bankruptcy process.
However, if you have equity in your home over the exemption limit, you may be forced to sell your house to pay your debt or “buy it back” by paying the trustee the value of your house.
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.
How Does Bankruptcy Affect Credit
Both forms of bankruptcy can severely damage your credit for many years to come, so filing isn’t an action that should be taken lightly.
Chapter 7 bankruptcy stays on credit reports for 10 years, while Chapter 13 bankruptcy sticks around for seven years. This means even nearly a decade after filing, potential creditors, lenders, landlords, utility companies and others legally allowed to view your credit will be able to see the bankruptcy on your report. Having bankruptcy in your history can cause you to be denied for new applications, such as for loans or credit cards. If a lender or creditor does approve you, you may face sky-high interest rates or fees.
During this time, though, you can help rebuild your credit by making wise financial decisions. If you pay all of your bills on time, avoid overspending, and use a secured credit card responsibly, you can slowly nudge your credit score back up.
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Bankruptcy And Assets: Which Are Exempt
Every province and territory in Canada has its own list of exemptions, designed to leave you with enough resources to make a fresh financial start.
In Canada, the federal Bankruptcy and Insolvency Act defines three kinds of exemptions:
- Property you hold in trust for other persons.
- GST credit payments and prescribed payments relating to your familys essential needs.
- Other exempt property defined by the province or territory in which you live.
What are your likely exemptions? What can you keep in a bankruptcy? A Licensed Insolvency Trustee has up-to-date information on exemptions for every province and can advise you on how these apply to your situation. Your first consultation is free and confidential contact a Trustee today!
The provinces and territories generally define other exempt property as including some or all of the following categories, up to limited values that vary greatly from province to province:
- Food and heating fuel needed by you and your dependants
- Clothing needed by you and your dependants
- Household furnishings and appliances
- Pensions or retirement savings
- Miscellaneous categories in some provinces
The tools exemption and the farm exemption cannot both be taken you may claim one category only, which applies to your principal occupation.
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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Secured Car Loans And Leased Cars In Bankruptcy
First, if your car is security for a car loan, you can keep your car, but only if you continue making your car loan payments. This applies to both a car that is financed through a bank or other lender, or a car that is leased through an automotive finance company.
Before agreeing to continue making car payments, you should determine the value of the car, and the amount that remains owing on the loan. If there is significant negative equity, it may not be wise to keep the car.
For example, if you used your car as security for a $30,000 consolidation loan, and the car is only worth $5,000, it is not financially prudent to agree to pay $30,000 so that you can keep your $5,000 car. Unless the lender is willing to reduce the amount of the loan to more closely match the value of the car , it may be prudent to surrender the car to the lender when you file bankruptcy. The resulting shortfall is then included in your bankruptcy.
Can I File Bankruptcy And Keep My House And Car
by ADMIN·March 18, 2020
Bankruptcy is a frightening thought for everyone. It is a legal order that allows the court to take away property because the individual or organization is unable to cover outstanding debts.
Therefore, the first question most people considering bankruptcy ask is: Can I file bankruptcy and keep my house and car?
The answer to the question depends on the chapter of bankruptcy and state regulations. However, in some instances, it is possible to save your car and home.
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What Happens To Your Car After You File For Bankruptcy
Filing for bankruptcy doesnt have to mean your auto will end up on the back of a tow truck. But its important to know what happens to your vehicle because there are different rules in a bankruptcy case depending on your situation.
In a Chapter 13 bankruptcy, you go into a repayment plan for your debts so that youre able to keep your assets as long as you keep paying what was agreed. Whether you own the car already or you have a loan, its possible to keep it in a Chapter 13 bankruptcy. However, most people file bankruptcy under Chapter 7, so lets dive in on what you need to do to determine whether you can keep the vehicle.
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.
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Home Equity In Chapter 13 Bankruptcy
Chapter 13 bankruptcy works differently. You won’t be forced to give up any property. Instead, you’ll pay for the nonexempt portion of the equity in your plan. Of course, if you have significant nonexempt equity, this could get expensive. You’ll have to demonstrate that you have enough income to pay all amounts required in your plan.
Example. You have $50,000 in equity in your house, but the maximum amount you can exempt is $30,000. You’ll have to structure your Chapter 13 payment plan so that your unsecured creditors will receive at least $20,000 over the life of the plan. That amount is in addition to any other debts your plan payment must cover, like mortgage arrearages and car payments.
Find out more about what happens to your home and mortgage in Chapter 13 bankruptcy.
But being able to protect or pay for your home equity isn’t enough. You’ll have other requirements you must meet, as well.
What Happens If You Dont Include A Personal Injury Claim In Your Bankruptcy Petition
If youâve already filed a personal injury claim or you intend to do so, you must disclose this information on your bankruptcy petition. If you know it exists, you have to list the claim, even if you havenât filed a suit or even hired a personal injury lawyer yet. If you donât report this information and later decide to pursue a personal injury case against the at-fault party, the bankruptcy court could report this turn of events, leading your personal injury lawsuit to be dismissed.
Why? Personal injury claims are meant to compensate a victim for the monetary losses they have suffered as a result of the accident in question. If you ask the bankruptcy court to discharge debt you incurred as an injured party, the money youâre awarded from a personal injury suit isnât directly addressing these debts. This is why you have to disclose this information on your bankruptcy petition or youâll risk dismissal of a personal injury claim filed down the road.
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