What If The Bankruptcy Exemptions Are Insufficient To Protect My Car
If your Exemption is not high enough to protect all of the equity available in your car, your car may still be protected.
Depending upon the amount of equity above the exemption amount, the Trustee may elect to abandon his or her interest in your car anyway, if the leftover amount is relatively small. This is because the Trustee will have to incur expenses to sell your car. If the cost of selling your car, plus the exemption amount, will not yield any money for creditors, it is unlikely the Trustee will want to sell your car.
For example, if the equity in your car is $5,000 and the available exemption totals $4,500, it is not likely the Trustee will sell your car to realize $500, given the cost to sell the car.
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Understand The Extent Of Your Debts
First of all, it is important to understand your financial situation and uncover the extent of your debts. Everybodys financial circumstances are different, and sometimes it is a life event that prompts you to seek help from a bankruptcy trustee firm for debt relief. Prompts can include missing mortgage or loan payments, collection agency calls, a notice of legal action, or consistently reaching your credit card limit.
Our Chapter 13 Lawyers Fight Against Car Repossessions
Is your debt threatening your ability to make car payments? Then you may be able to save your car and stop repossession by filing Chapter 13 bankruptcy. For almost 30 years, The Sader Law Firm has assisted individuals and their families in and around Kansas City and throughout the states of Missouri and Kansas dealing with stressful financial situations. Our Chapter 13 lawyers have experience working closely with those who fear repossession.
Chapter 13 stops the repossession of your car, allows you to continue driving and, in some cases, lowers your monthly payment.
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Calculating Your Equity In Your Car
In simple terms, the equity in your vehicle represents the portion of the cars value that belongs to you. You can determine it by subtracting how much you owe the lender from its current fair market value .
For example, if the current car is worth $5,000. If you own the car outright and do not have any loan balance, then you have 100% equity in it. Your equity is equal to the fair market value which is $5,000.
If you have an auto loan balance and you still owe the car lender a total of $2,000, then you have to subtract that from the current value of $5,000. That leaves you with an equity of $3,000.
Scenario 1: 100% Equity or Lower than MVE
In this scenario, you can keep the car as long as its value is below the exemption amount. Lets say you have 100% equity and the FMV of your car is $3,000. If the motor vehicle exemption in your state is $4,000, then you can keep it.
Scenario 2: 100% Equity or Higher than MVE
The answer to whether you can keep your vehicle in bankruptcy will depend on how much higher your equity is compared to the motor vehicle exemption. Here are 3 sample scenarios that could happen when you filed for bankruptcy:
A. You have 100% equity and the FMV of your car is $15,000. If the MVE in your state is $4,000, then the remaining $11,000 is not protected. If this is so, the bankruptcy trustee sells your car and pays you $4,000 back. They will use $11,000 from the sales proceeds to pay your other debts and pay the cost of selling the vehicle.
Can I Keep My Car If I File Chapter 13 Bankruptcy
If you file a Chapter 13 bankruptcy, you can continue to make payments under your current vehicle loan agreement or include your car payment in your monthly bankruptcy payments.
The expert consensus is that it is easiest of all to keep a vehicle when filing for Chapter 13 Bankruptcy because Chapter 13 is considered reorganization bankruptcy and is all about structured repayment. Chapter 13 allows you to keep most to all your property while making structured repayments for three to five years.
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What Is A Lien
A lien is a charge against or interest in property to secure payment of a debt or performance of an obligation. A creditor who lends you money such as for the purchase of a car or house may require a lien against the property, which is an agreement that they may assume ownership, through foreclosure or repossession, if you default on payments. If you make payments as scheduled, a lien expires when the loan is paid. Institutions in the business of lending money want to be repaid. They dont want to take possession of property. When they must, they sell it at auction, usually at a loss. And when that happens, the borrower is still responsible for the deficiency, the difference between the sale price and whats left on the loan.
But, if a lender couldnt get payments out of the borrower when they had the car to drive, getting payments for a car that is long gone is going to be even tougher. At this point, many lenders sell such loans to companies that specialize in collecting bad debt, often through aggressive tactics.
Getting Approved For A Car Loan After Bankruptcy Is Difficult But Its Not Impossible With A Little Extra Work You May Be Able To Finance A New Set Of Wheels Sooner Than You Think
If youve filed for bankruptcy or are considering this option, you may find yourself having trouble getting approved for credit, including a car loan.
Lets take a look at how filing for a Chapter 7 or Chapter 13 bankruptcy could affect your ability to get a car loan, and steps you can take to help increase your chances of loan approval.
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Option : Keep The Car And Sign A Reaffirmation Agreement
If you reaffirm the car loan, you continue to be personally liable for the car loan even after your Chapter 7 bankruptcy is done. If you default on your monthly payments, the lender can pursue both you and your cosigner for payment of any remaining balance following the repossession of the vehicle.
If you choose this option, youâll likely be current with your monthly payments throughout your bankruptcy case. As a result, your bankruptcy filing wonât affect your cosigner or their credit score.
Car Loans And Refinancing After Filing For Bankruptcy
It might seem like a daunting task to find a car loan or refinance loan after bankruptcy, but it can be done. Since every bankruptcy is different, the length of time it takes for you to get favorable terms on a loan will vary based on how you manage your credit, continues Messier. The best way to work toward favorable loan terms is by managing any current debts including credit cards and loans as wisely as possible. With a little patience and mindful credit habits, you should see your credit, and your chances of getting approved for a car refinance loan, improve over time.
Ready to refinance your car loan?
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Repossession Is Proper After Discharge
Debts discharged in bankruptcy are gone forever and donât ever have to be paid back. Itâs illegal for creditors to attempt collection on discharged debts. However, repossession of property backing a secured debt is allowed after discharge. Repossession of collateral is different than trying to collect from you personally.
Car repossession is proper after a Chapter 7 discharge because the lien on the car is not erased by the bankruptcy. If you default on your monthly car payment after bankruptcy, your lender has the right to repossess your vehicle. State law governs the repossession process.
After you file for bankruptcy protection, the automatic stay takes effect, which stops all collection activities, wage garnishment, repossessions, eviction, foreclosure actions, and harassing collection phone calls. If you choose to surrender your vehicle in bankruptcy, sometimes creditors will file a motion for relief from the automatic stay to repossess your car sooner, some wait for the automatic stay to expire 45 days after the initial meeting of creditors if no reaffirmation agreement is signed before then, and some wait to repossess the vehicle until the bankruptcy discharge is entered. Once your discharge is entered, the automatic stay is terminated because itâs no longer needed.
Can You Keep Your Car After Filing Bankruptcy
There are several factors that go into whether you’ll be able to keep your vehicle through the bankruptcy process. Since your vehicle is considered an asset, and potentially a valuable one, it’s something creditors may pursue when looking to collect debt. Your vehicle may, however, be counted under an exemption that protects it from repossession. In general, the following is considered to determine if you’ll be able to keep your car:
- The type of bankruptcy you’re filing
- Whether you own, lease or are still financing the vehicle
- The value of the vehicle
- What exemptions apply where you live
Read on to learn more about what you can expect to happen to your vehicle when you file bankruptcy.
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Determining What Will Happen To Your Car
Each chapter offers different benefits. Once you understand that you’ll have to pay for any car that you’d like to keep and you know how much equity you can protect, you’ll be ready to decide which bankruptcy option is best for you.
For instance, Chapter 7 bankruptcy is an excellent choice for those who can protect all equity and are current on payments. Chapter 13 bankruptcy works well if you’re behind on payments or you have a significant amount of nonexempt equity and would still like to keep the car.
Can I Get A Car Loan After Bankruptcy
Feb 25, 2021 Bankruptcy cases typically need to be discharged before car loans are possible unless its a Chapter 13 case and the court approves the loan.
After filing bankruptcy, some things you may have to deal with are difficulty getting approved and high-interest rates. Chapter 7 vs. Chapter 13 Bankruptcy.
Sep 11, 2020 How Are Auto Loans Handled During a Chapter 13 Bankruptcy Case? Filing a Chapter 13 case can help you with your auto loan in several ways:
Debts, when filing under Chapter 7 of the bankruptcy code, can be discharged. The good news is that if you agree with your car loan creditor to repay
Oct 24, 2019 You may have trouble buying a car once you file for Chapter 7 bankruptcy, since lenders will likely want proof that your bankruptcy has been
Mar 18, 2020 A secured lender may take your property and sell it to satisfy the loan in the event of a default. Filing for bankruptcy does not relieve
WHAT IF I HAVE A LOAN ON MY CAR? As discussed above, it is the equity that you have in your car that is the determining factor as to whether the Trustee can
Jun 12, 2020 Individuals can file for two kinds of bankruptcy: Chapter 7 or Chapter 13. According to Credit Karma, your ability to get approved for a car
Will I Lose My Vehicle If I File Chapter 7 Bankruptcy? vehicles under a Chapter 7 filing you have several opportunities to re-negotiate the car loan.
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Reaffirm Your Current Car Loan
Lenders take one of two positions with a car loan in bankruptcy. The majority require that you complete a court-approved reaffirmation agreement. This is a legal, enforceable contract filed with the bankruptcy court and signed off by the judge. It states your promise to repay all or a portion of a debt that may otherwise have been subject to discharge in your bankruptcy case.
Some lenders demand that you sign this agreement and will not send you statements or report payments to the credit bureau without the court-approved agreement. In many instances, lenders consider it a breach of the terms of your loan and will repossess the vehicle if you fail to sign the agreement.
Car Loans In Bankruptcy
Bankruptcy effectively gets rid of debt by breaking the contract between the creditor and borrower that requires the borrower to repay the loanthe promissory note. What bankruptcy doesn’t do, however, is get rid of a voluntary lien, such as a mortgage or car lien. As a result, if a bankrupt borrower doesn’t make an arrangement to pay for the vehicle, once the bankruptcy case is over , the bank will use its lien right to repossess it.
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How Bankruptcy And Car Repossessions Work
If you default on your car loan, the lender can repossess your automobile. Once the lender has your car in its possession, the lender can sell it at auction to cover the remaining balance on your car loan.
The primary power of Chapter 7 and Chapter 13 bankruptcythe two types of bankruptcy most people choose betweenis that when you file for bankruptcy, the court issues an order called an automatic stay prohibiting most creditors from engaging in collection activities. The creditor must stop in its tracks which gives you more time to take steps to get your car back. The process youll take will depend on whether you file for Chapter 7 or Chapter 13.
Should You Pay With Cash Or Credit For A Car After Bankruptcy
Assuming youre able, paying with cash is almost certain to be cheaper even if you have a good credit rating, which you certainly do not soon after a bankruptcy. With your old debts discharged, saving the money you would have paid on those old loans and credit cards might allow you to put together enough money to get a car without borrowing again.
Financing a car after bankruptcy will be more difficult, but its still possible.
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Get Your Credit Reports And Credit Scores
Yeah, checking your credit probably feels a little like pulling a bandage off a big gaping wound. Its not going to be pretty. But the lender is going to check your credit, so you might as well know what they are going to see. Besides, its always a good idea to review your reports after bankruptcy because mistakes are not uncommon.
You can get your free annual credit reports from AnnualCreditReport.com and you can get a free credit report summary from Credit.com that explains how lenders are likely to view your information. Although the lender will pull a customized credit score that likely differs from the one you see, it will still give you an idea of where you stand in general.
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Pay particular attention to what the report says about previous auto loans, since those are often more heavily weighted in the credit scoring models used by auto lenders. Positive on-time car loan payments reported during and after bankruptcy can be helpful.
Connecticut bankruptcy attorney Eugene Melchionne suggests asking yourself the following questions: Was there a previous car loan involved in the bankruptcy? Was that car loan reaffirmed? If the loan is reaffirmed, then the tradeline should be showing up on the credit report.
How Does Bankruptcy Help With A Repossession
Filing a Chapter 7 or a Chapter 13 can help with repossession in different ways. Chapter 7 is a straight bankruptcy and is most useful if you want to walk away from the car and eliminate the debt. A chapter 7 bankruptcy will usually eliminate a deficiency balance that is owed after a car is repossessed.
Chapter 13 bankruptcy can help you stop repossession and sometimes get a repossessed car back. Chapter 13 is like debt consolidation and can be used to help you keep a car when you have fallen behind on the payments.
If your car has already been repossessed and you want to get it back, then time is of the essence. When a car is repossessed, a bankruptcy must be filed prior to the auction of the car in order for us to force the return of the vehicle. This usually means that we must file a bankruptcy case within 10 days of the car being repossessed. Once a case is filed, it usually takes a day or two before the car is released back to the borrower.
If you need help keeping your car, call our Jackson, MS Bankruptcy Lawyers to keep you from being a victim of repossession.
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Getting Chapter 7 Bankruptcy Help From A Plano Bankruptcy Lawyer
Filing for bankruptcy can be a daunting process, and you may find yourself fraught with many questions. For help with the filing process, and to get tailored legal assistance in dealing with your car repossession concerns, consider contacting our legal firm, Warren & Migliaccio, L.L.P. Contact us to go over your Chapter 7 bankruptcy options by phone 888-584-9614 or you can first check out our free Texas bankruptcy guide.
Are You Behind On Your Car Payments
If you are behind on your car payments and at risk for repossession, filing for bankruptcy will generate an automatic stay, which will stop creditors from repossessing the vehicle. At this point you can discuss with a qualified bankruptcy professional options to keep your car. These options include negotiating with the creditor to get car payments caught up, redeeming the vehicle or treating the vehicle in a Chapter 13 plan at a lower payment and interest rate.
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