Your Car In Chapter 7 Bankruptcy
Chapter 7 bankruptcy takes about four months to complete and doesn’t require you to enter into a repayment plan with creditors. You also get to keep, or “exempt,” a certain amount of property.
In exchange for forgiveness of your qualifying debts, you agree to turn over all of your nonexempt property to the court. The court sells the nonexempt property and distributes the funds to your creditors.
Almost every state allows you to exempt a particular amount of equity in a car . Your first step will be to determine whether you can protect all of the equity. If you can, and you don’t have a loan, your analysis is overyou get to keep the car.
If you can protect all of your equity and you’re paying on a car loan, or if you used the vehicle as collateral for another loan, you’ll have three choices: surrender the vehicle, reaffirm the debt, or redeem the car for the value.
If you can’t protect all of your equity, go to “Unprotected Car Equity in Bankruptcy” below.
Do You Need A Different Loan
Do you feel uncomfortable with your current loan because your cosigner filed bankruptcy? If you find yourself in a situation where you needed a cosigner due to your credit, but now your cosigner is out of the picture, you might consider refinancing your current loan or even selling your vehicle and going it alone on your next loan, and we want to help.
If you’re worried that your credit is stopping you from getting a loan on your own, then you may not be applying with the right lenders. Here at Auto Credit Express, we work with a nationwide network of special finance dealerships that have subprime lenders ready to work with your situation whether it be bad credit, no credit, or bankruptcy. See who we can match you with by filling out our simple, no-obligation auto loan request form today!
Need More Bankruptcy Help
Did you know Nolo has been making the law easy for over fifty years? It’s trueand we want to make sure you find what you need. Below you’ll find more articles explaining how bankruptcy works. And don’t forget that our bankruptcy homepage is the best place to start if you have other questions!
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What Bankruptcy Exemptions Apply To My Car
Exemptions are the provisions of the US Bankruptcy code excluding or exempting a certain amount owed out of the bankruptcy process. This means the property will not be liquidated or sold as part of the bankruptcy process. If the exemption analysis is done correctly, then you will not have to lose the qualifying property you own. A skilled Allentown bankruptcy attorney will help you navigate through that part of the process.
When an item is exempt, this usually means that it will not be sold or liquidated as part of the bankruptcy proceedings. Skilled bankruptcy attorneys usually claim exemptions at the outset of the bankruptcy filing. An experienced bankruptcy attorney will be able to give you a heads up on the exemptions and about the repercussions of this analysis in your property interests.
In the case of your car there are three important exemptions:
Can You Afford Your Car
When you file for bankruptcy and want to keep your car, you can choose to execute a reaffirmation agreement with your lender. In general, bankruptcy wipes out your personal obligation to pay a debt. When you sign a reaffirmation agreement, you agree to continue to be obligated for the debt. With a reaffirmation agreement, you take your car out of the bankruptcy process. You continue to make your regular payments and you keep your car.
A reaffirmation agreement is a good way to keep your car through bankruptcy, but there are other factors to consider. First, a debt that you choose to reaffirm cannot be discharged in the bankruptcy. Youre stuck with it. Second, you will have to prove to the court that keeping your vehicle is not an undue burden. If the court determines that making car payments will be too difficult for you, it can deny your reaffirmation agreement. Theyll look at how much money you make and what your other obligations are. If you can maintain a minimal standard of living and still make your payments, youll be able to keep your vehicle.
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Do I Have To Pay The Car Loan After I File For Chapter 7 Bankruptcy
The answer is both no and yes, depending on your goals. The answer is no because Chapter 7 bankruptcy eliminates your personal liability for most types of debt, including car loans. This means that you no longer have any personal obligation to pay the car loan, and if you stop paying, the lender cannot come after you for the unpaid amount.
On the other hand, the car loan is a secured debt, meaning that the lender has a lien on the car to protect it against nonpayment of the loan. The car is the collateral for the car loan. If a secured debt is not paid, the lender can recover what its owed by taking the collateral and selling it. So, if a car loan is not paid, the lender can take the car, sell it, and get paid that way. Chapter 7 bankruptcy does not eliminate liens such as car loans, so if the car payments stop, the lender is able to take the car and sell it.
This means that if you dont want to keep the car that is subject to a car loan, all you have to do in Chapter 7 bankruptcy is stop making payments on the car, and eventually the lender will repossess it. You will not be responsible for any unpaid balance on the car loan. This approach may make sense if you dont have any equity in the car, or if you dont want to keep the car for any other reasonfor example, if the maintenance and repair costs are too high.
The Motor Vehicle Exemption
Pursuant to Section 522 of the US Bankruptcy Code, debtors can take an exemption in one vehicle for a total interest or value of up to $4,000. To reach a final determination of the exact amount that will be exempt, you will look at the market value of your car, commonly known as the blue book value to make the calculation. For example, you will subtract the blue book value amount to the total debt owed, and you can take an exemption up to the $4,000 allowed under the code. If the amount is within limits, your car will not be liquidated under Chapter 7. If the amount is close, an experienced Philadelphia bankruptcy lawyers can help you.
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How A Lawyer Can Help
If youre facing a bankruptcy case, its important to have the right legal help. While it is, technically, possible to file for bankruptcy on your own, or pro se, a lawyer can provide much-needed guidance.
A bankruptcy lawyer can provide valuable advice regarding:
- Which type of bankruptcy is best for you, Chapter 7 or Chapter 13
- Which assets are exempt or non-exempt
- Your rights when youre filing for bankruptcy during a foreclosure
- The bankruptcy process and procedures
- Tax advice related to your case
- Future implications of your decision to file for bankruptcy
Additionally, a bankruptcy lawyer will file all the necessary paperwork for you, which can be overwhelming for most people. Whether you are considering bankruptcy or about to take action, you will need proper representation to understand all of your rights and responsibilities throughout the process.
The team at Husker Law is seasoned in bankruptcy law, as well as family and divorce law. If you are in the Nebraska area, our lawyers can advocate for you, whether you are filing for bankruptcy or facing a complicated divorce or child custody battle.
While we specialize in certain law areas, we can also provide assistance with clearing criminal records, estate law, aviation law, and business formation.
How Chapter 13 Works
Under Chapter 13 bankruptcy, you, your creditors, and the court will collaborate to work out a payment plan. The process is somewhat complicated, but youll generally be able to continue to make your car payments. If you have arrearages on your auto loan, youll be able to make those up through your plan payments, too. Chapter 13 debtors usually pay off their cars over the course of the plan.
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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.
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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Can I Keep My Car If I File Chapter 7 Bankruptcy
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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 byAttorney 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.
How To Keep Your Car When Filing For Bankruptcy
It is definitely possible to keep your car when you file for bankruptcy. If you need help with your bankruptcy, you can count on DoNotPay to help you do it right.
In these unprecedented times, many of us will find ourselves buried in debt and there is no clear path to how to resolve it all. For many people, it is just a matter of time before they are back on top. Others will need to file for bankruptcy and receive a fresh financial start to get themselves in a position to move forward.
While your for some time following your bankruptcy, it too can ultimately recover from the situation in time. You might even be surprised how soon you can start to rebuild your credit following a bankruptcy proceeding.
When people imagine what bankruptcy looks like, they may picture themselves losing everything. It is true that you may have to part with some things, but you really won’t have to lose everything. In most cases, it is possible for you to keep your car. The bankruptcy courts make certain allowances for you in terms of household furnishings and other personal property as long as it is not too valuable. You will have options regarding your car, no matter what type of bankruptcy you decide is best for you.
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What Happens To My Car Or Vehicle When I File For Bankruptcy
Auburn Bankruptcy Attorneys
Stop your vehicle repossession now! Filing for bankruptcy and your car.
What happens to my car or truck when I file for bankruptcy? How can I stop a car or property repossession?Your car in bankruptcy
When many of our Auburn bankruptcy clients first contact our offices, they are very concerned about losing their vehicle. And, rightfully so. How can you even get to work without a car? Unfortunately, there’s a lot of confusion out there regarding filing for bankruptcy and what happens to someone’s care when they do so. Here’s what you need to understand.
If you can afford to keep making your payments after wiping out your creditors, bankruptcy is often one of the most effective ways to keep your car from being repossessed. Bankruptcy offers ways to shed debt while holding on to one of your most important assets your car. If you are making payments on a car, you can usually keep the car in bankruptcy so long as you keep making the payments. Bankruptcy can also offer ways to restructure your payments to make them more affordable, Most importantly, filing for bankruptcy improves your monthly cash flow to make payments easier to handle.
The redemption option involves paying off the balance of the car loan at the value of the car. This option makes sense if the car is worth a lot less than the loan balance. Some finance companies can loan you money while you are in bankruptcy to redeem the car.
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Car Repossession And Chapter 7 Bankruptcy In Pennsylvania
The repossession of your car could be crippling, limiting your ability to work or manage daily household chores and errands. Chapter 7 can provide a remedy through an automatic stay. An automatic stay is a court injunction that goes into effect the moment you file a bankruptcy petition. This injunction stops all collection actions against you, including the repossession of your car. If your repossessed car was not sold, it must be returned to you. However, once that happens, you must cure the default within 30 days to maintain possession of your vehicle.
Another option is to redeem the car by paying the fair market value in a lump sum within 30 days after filing for bankruptcy. The fair market value is usually the blue book value. Some financial institutions offer redemption loans for this purpose.
There are multiple options related to your car when you file for bankruptcy under Chapter 7. You can either exclude the car if you can meet the exemption requirements or seek on the following three options:
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Keeping The Car Outside Of Bankruptcy
The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act eliminated drive through car loan agreements for bankruptcies. Before the act, consumers and car lenders could continue with whatever agreement they wanted, ignoring the bankruptcy. While drive-throughs are now against bankruptcy rules, it still happens and courts rarely enforce it. When no intention to reaffirm, redeem or surrender the car is filed by the deadline, a car loan is dropped from the bankruptcy. In many cases, the car owner and lender continue to do business and always, and courts rarely enforce it. Of course, this only works for the car owner if theyre making payments on time.
Since this option is counter to bankruptcy law, its not necessarily something youd want to pursue, and it provides a lot less protection than going with one of the routes allowed by law.
Keeping A Car In Chapter 7 Bankruptcy By Reaffirming The Car Loan
Many lenders will let you keep a car after bankruptcy as long as you’re current on the payment and continue to make the payment after the case ends. The lender will give you the title when you pay the amount due under the discharged contract.
This arrangement works well because if the car breaks down or is in an accident, the filer can stop making payments and give the vehicle back to the lender. However, without a contract in place, the payments aren’t reflected on the filer’s credit report, and the lender can repossess the car at any time.
Filers who don’t want to risk losing the vehicle can sign a new contract called a “reaffirmation agreement.” Although you might be able to convince the lender to agree to better terms, you should assume they’ll remain the same because the lender isn’t obligated to modify the loan. Therefore, while signing a reaffirmation agreement can help you keep a car in Chapter 7 bankruptcy, it isn’t a tool you should rely on if you’re behind on your payments.
Learn more about your car in Chapter 7 bankruptcy.
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