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How Does Chapter 7 Bankruptcy Work
Chapter 7 bankruptcy provides financial relief to qualified individuals struggling with debt. Once filed, the automatic stay stops most creditors from contacting you. While in place, those creditors cannot call you, send you bills or letters, or take other action to collect the debt. If you have a car loan when you file for bankruptcy, the creditor cannot repossess the car.
On average, you can expect the Chapter 7 process to take three to four months.
Wiping Out Debt In Chapter 7 Bankruptcy
Many of the debts that plague the average consumer will go away. For instance, you’ll be able to wipe out utility bills; medical debt; personal loans, such as payday loans; and major credit card and department store balances.
You won’t be able to get rid of everything, however. You’ll remain responsible for any nondischargeable debt, such as balances on secured credit accounts commonly used by stores that sell jewelry, electronics, furniture.
Here are a few other obligations that you’ll remain responsible for:
- income taxes incurred during the prior three years
- domestic support obligations, such as child or spousal support, and
- student loan obligations.
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Protecting Car Equity In Chapter 7
A Chapter 7 bankruptcy isn’t intended to deprive you of all of your property. Bankruptcy laws, called exemptions, let you keep a certain amount of your property to make a fresh start. Almost all people need a car to get to work, and most states have a motor vehicle exemption that will let you keep a modest vehicle.
Exemptions in Chapter 7 Bankruptcy
Each state has a set of exemptions, and the protections vary widely. Some states even allow a filer to choose between the state and federal bankruptcy exemption system. A filer can use whichever system will work best. While you keep exempt property, what will happen to your nonexempt propertyproperty not protected by an exemptionwill depend on the chapter you file. In Chapter 7, the trustee sells your nonexempt property for the benefit of your creditors. If your property is exempt, the Chapter 7 bankruptcy trustee can’t take it. Learn more about your property and exemptions.
How Motor Vehicle Exemptions Work
Whether you’ll be able to keep your car will depend on the exemption amount allowed by your state, as well as the amount of equity in it. For instance, if you own a car worth $5,000 and your state’s motor vehicle exemption is $7,000, the vehicle will be fully protected.
If the Motor Vehicle Exemption Doesn’t Cover the Equity
In Chapter 7 bankruptcy, here’s what the Chapter 7 bankruptcy trustee appointed to your case will do if you can’t protect all of the vehicle’s equity:
Using a Wildcard Exemption to Keep Your Car
The Bankruptcy Trustee For Chapter 7 Bankruptcy
The court exercises its control through a court-appointed person called a bankruptcy trustee. The trustees primary duty is to see that your creditors are paid as much as possible of what you owe them. And the more assets the trustee recovers for creditors, the more the trustee is paid. The trustee will examine your papers to make sure they are complete and look for non-exempt property to sell for creditors benefit. The trustee will also determine whether any financial transactions occurring the year before you filed can be undone to free up assets for creditors. In most Chapter 7 bankruptcy cases, the trustee finds nothing of value to sell.
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Giving Assets To Family Members
This is a major red flag. You cant give away your good stuff cash, property, cars, jewelry, electronics to friends or relatives with the understanding they will give it back later. Its dishonest. Giving your car to a family member just before you file for bankruptcy is a clear-cut way to lose the car. If you own the car, it must be listed as an asset or if you still owe money, it must be listed as a liability. If you want to keep your car after filing for bankruptcy, there are strategies in place to help you do that.
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?
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Can I Keep My Car If I File For Chapter 7 Bankruptcy
If you find yourself in a place where bankruptcy is the only way forward, you might wonder how the process will affect your personal belongings.An especially common concern is whether youll be able to keep your car. Here we will discuss the variables that come into play along with some smart steps and strategies tohelp you keep your car when filing for Chapter 7 bankruptcy.
Chapter 7 Bankruptcy and Your Car
One key element that will affect the outcome is how much equity you hold in your car. To determine equity you first need to know yourvehicles value, less any outstanding debt. This term will come up again and again, so its good to know.;
Understanding the basic premise of a Chapter 7 bankruptcy filing is also important. Chapter 7 filings are often referred to as liquidationbecause property and assets can be sold to pay off debt. But because this could mean a serious hardship for you when you are already in a tough spot, exemptions often allow you tokeep some personal property. For example, the Ohio Chapter 7 car exemption of $4,000 can be used to offset equity, and the Ohio wildcard exemption of $1,325 could also beapplied.;
Can I File Chapter 7 Bankruptcy and Keep My Car Loan?
Can I File Chapter 7 Bankruptcy and Keep My Leased Car?
Rely on Your Local Bankruptcy Lawyers
Can I Keep My Car If I File Chapter 7 Bankruptcy In 2021
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In a Nutshell
Most people can keep their car and get debt relief by filing bankruptcy. Of course, if you need a fresh start but you need your car just as much, you probably wonder about how this works in Chapter 7 bankruptcy. Keep reading to learn what a bankruptcy filing means for your car.
Written by Attorney Andrea Wimmer.
Most people can keep their car and get debt relief by filing bankruptcy. Of course, if you need a fresh start but you need your car just as much, you probably wonder about how this works in Chapter 7 bankruptcy. Keep reading to learn what a bankruptcy filing means for your car.
Is the car yours? Or are you still paying the bank for it?
Either way, itâs your property, called an asset, and is listed on Schedule A/B of your bankruptcy forms. The only exception to this general rule is if youâre leasing the vehicle.
Leasing the car?
If youâre not making car payments to anyone, you own the car free and clear.
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Alternatives To Declaring Bankruptcyhow To Find Out More & What Might Be Available To You
Most of the time when someone is experiencing financial difficulty, they think that if things dont improve theyll have to go bankrupt. The truth is that between financial difficulty and bankruptcy there are a lot of options. Our credit counsellors are experts at helping people explore these options and find the solution that will not only work the best for you today but will put you on the path to achieve you future goals.
For some people, bankruptcy can prevent them from achieving future goals including some career paths. The nice thing is that there are often other options sometimes lots of them it all depends on your situation. The best thing you can do is make an appointment to speak with a credit counsellor, go over your situation with them, and see what your options are. If it turns out that bankruptcy is your best option, theyll layout your next steps for you and refer you to a reputable trustee.
Were a non-profit service. So appointments with our credit counsellors are always free, non-judgmental, and completely confidential.;, or;chat with us online. You have nothing to lose.
Fortunately, for many people who feel this way, there are other less severe options. Speak with one of credit counsellors to learn all your options. Theyll be happy to carefully review your whole financial situation with you and answer any questions you may have. Speaking with our certified counsellors is always free, confidential and without any obligation. Were here to help.
Enter Into A Reaffirmation Agreement With Your Car Lender
A reaffirmation agreement with your car lender is a possibility if you dont own your vehicle outright. A reaffirmation of the debt is your promise to pay the car loan according to its terms. Your car stays separate from the bankruptcy proceeding. The car is no longer part of the bankruptcy, and the bankruptcy proceeding does not impact it. If you default on your loan payments after the reaffirmation, the leaseholder can repossess your car.
If you want to enter into a reaffirmation agreement to keep your car out of bankruptcy, the bankruptcy trustee must approve it. Some trustees dont like reaffirmation agreements. Others will approve them if the lender agrees to a lower rate or balance. To get a reaffirmation agreement, you must show that you can make the payments for the vehicle.
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Can I Keep My Car If I File Bankruptcy
Bankruptcy usually provides a way for you to keep your car. However, this is a complex issue that needs to be discussed with a bankruptcy attorney.
The following options are available when you file
- If you own a car, you can keep it under either the Tennessee or federal bankruptcy exemptions as long as it does not exceed a certain value.
- If you owe money on a car, you can keep it byreaffirming the debt and continuing to make payments. If the car is worth less than the amount of money that you owe, you may be able to reduce the amount you owe to the current market value.
- If you owe money on an older car, you can discharge the debt. Depending on the liquidation value of the car, the lender may not bother to pick it up. In that case, you can keep the car.
- If your car has been repossessed, you can get the car back by promptly filing bankruptcy. You need to act before the car is sold at auction.
If you own a car that you would lose when filing Chapter 7 bankruptcy , you can keep it if you file;Chapter 13 bankruptcy.
As your lawyer, I will use my more than 30 years of experience to help you determine the best way to protect your car.
Chapter 7 Bankruptcy: What Can You Keep In 2021
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In a Nutshell
Chapter 7 bankruptcy exemptions allow you to protect property during your bankruptcy. Usually these exemptions allow you to keep most of your day-to-day property.
If you’re considering filing for bankruptcy, you might have images of repo-men coming into your home and taking your possessions, selling them to the bank and leaving you empty-handed.
While this may be the way bankruptcy looks in cartoons, in reality, the government created laws that help protect your property during bankruptcy. These protections are called the bankruptcy exemptions.
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How To Keep Your Car In A Chapter 7 Bankruptcy
Luckily, as soon as you file Chapter 7 bankruptcy, an automatic stay goes into effect, stopping creditors from collecting debts you owe or from repossessing your vehicle. This gives you time to decide which course of action to take with your car.
In a Chapter 7 bankruptcy, if the equity in your vehicle meets or is below the exemption amount, you can keep your car one of two ways:
If youre unable to use either of these options, and the equity in your vehicle is above the exemption amount in your state, you won’t be able to keep your car if you can’t come up with the cash to make up the difference. However, you can surrender it.
Can I Keep My Car After Filing For Bankruptcy
You might think that you have to give up everything that you own to file for bankruptcy. That isnt true. Bankruptcy laws give bankruptcy filers exemptions. The exemptions allow people to keep things that are the most important to them. They allow you to keep the things that you need the most to live, go to work, and carry out your business. Cars are one of the most important exemptions in Nevada bankruptcy law.
When we meet with people who are considering filing for bankruptcy, they often want to know if they can keep their car when they file for bankruptcy in Nevada. In many cases, the answer is yes. However, you will likely want to work with an experienced bankruptcy lawyer in Las Vegas to ensure you are able to do so.
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Motion To Redeem Your Car In Bankruptcy
Another way to save your car during bankruptcy is by making a motion to redeem your vehicle. Redeeming your vehicle allows you to purchase it from your lender for its retail value at the time you file. The value that matters is the value of the vehicle at the time you file for bankruptcy. Its likely a lower amount than when you purchased the vehicle.
To redeem your car, you make a motion to the court as part of the bankruptcy proceeding. You must present evidence of the value of the car. Most courts want to see information from Kelley Blue Book or the National Auto Dealers Association. You must also show that you want to keep the vehicle for personal or household use. You must serve a copy of the motion on the car lender.
If the court approves your motion to redeem your car, your car lender must accept a lump sum payment for the value of the car. In the end, you end up with title to the vehicle free and clear. To redeem your car, you must have the funds available to pay your lender for the fair market value of your car. A motion to redeem may be your best bet when your vehicle is worth less than your loan.
What Type Of Debt Is A Car Loan
Unlike credit cards and many personal loans, a car loan is a secured debt. Secured loans require collateral. In the case of an auto loan, the collateral is the vehicle itself.
When borrowers are unable to afford their auto loan payment and fall into default, lenders can legally repossess the collateral on the loan . Generally, lenders arent required to give advance notice of repossession if your loan is in default. If your repossessed car is sold, the lender may apply the proceeds toward your outstanding loan debt.
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