Automobiles And Motor Vehicles
You have several choices for keeping your car a Chapter 7 bankruptcy.
After you have filed the bankruptcy. the first option is to continue making payments on the auto loan. Whether you owe more than the car is worth or less than the car is worth, the car finance company really only cares about getting paid. So as long as you are making payments they will allow you to keep the car. This is called pay-as-you go. The main advantage of pay-as-you-go is that if you have financial trouble after the bankruptcy is over, you can turn the car back to the finance company without any consequences. Since you are not technically required to pay anything on the loan there is no consequence to stopping paying other than giving the car back.
The second option would be to file whats called a reaffirmation agreement. A reaffirmation agreement says even though I do not owe this debt anymore due to filing bankruptcy, I agree to remain liable for the debt owed on the car. This is not always the best solution but it does have some advantages. The biggest advantage is that if you reaffirm a debt it continues to be reported that on your credit. So it drives your credit score up earlier and faster than if you just pay-as-you-go. The main disadvantage to filing a reaffirmation agreement is that if you do have financial trouble after the bankruptcy is over then you are liable on this debt.
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.
Will Filing For Bankruptcy Allow Me To Keep My Car
Your car is likely one of the most valuable things you own. Not only is likely worth more money than any item you own besides your house, but it also serves a highly valuable role, helping you get to work, the doctor, and other places you need to go quickly. Without a car, you likely wouldnt be able to work, and youd have a very hard time caring for your children or even tending to your own needs. Many ask, Bankruptcy Allow Me to Keep My Car?
Understandably, one of the first things people are worried about when they consider filing for bankruptcy is whether they will get to keep their car. Youll need to talk to a Gilbert bankruptcy attorney about your particular circumstances to know for certain how bankruptcy can impact your vehicle. However, in most cases, you can expect to be able to keep your car.
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What Happens To A Leased Or Financed Car In Bankruptcy
Bankruptcy in Canada deals with unsecured debts. If your car is financed, through a lease or car loan, then that debt is considered a secured debt.
If you lease or finance a vehicle and file for bankruptcy, you can keep your vehicle as long as you are, and remain, current on your car loan or lease payments.
Your car lender can, however, repossess your vehicle if you fall behind on your payments, and bankruptcy wont stop that.
When You Might Lose A Car In Chapter 7
You’ll likely lose your car in Chapter 7 if you can’t protect all of the vehicle’s equity. It will depend on how much equity is available to pay creditors.
Here’s the test: If a reasonable amount would remain for creditors after giving you the exemption amount, paying off any vehicle loans, and deducting sales costs, the Chapter 7 trustee will sell the car. If not, the trustee won’t waste time or effort selling your vehicle. Unfortunately, how much is “reasonable” depends on the type of vehicle, the jurisdiction where you filed your case, the trustee’s practice, and even the state of the economy. A local bankruptcy attorney can help you figure out whether a trustee would likely sell your car to benefit your creditors.
You might also lose your car if you’re behind on your car payment when you file for Chapter 7. The lien rights you gave the lender let the creditor repossess the vehicle when you fall behind, and Chapter 7 doesn’t have a repayment plan provision that will help you catch up on the payments.
The creditor could file a motion asking the bankruptcy court to lift the automatic stay and allow the lender to proceed with repossession. Or, some lenders wait until after the Chapter 7 case closes.
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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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Can I Keep My House If I File 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 unless you can catch up on your payments quickly. 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.
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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.
Will I Lose My House If I File For Bankruptcy
This depends on several factors, and is best answered by a Licensed Insolvency Trustee. In most provinces, your home is one of the assets subject to liquidation in a bankruptcy. However, certain provinces exempt some or all of the value of a principal residence.
If your home is mortgaged, only the equity is subject to seizure. In the event you are able to retain your home, a Trustee can help you decide if keeping your home is the most prudent financial strategy.
See also: What Happens to My House After Filing Bankruptcy?
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Car Exemptions In Nevada Bankruptcy Law
If you own your vehicle free and clear right now, you can claim an exemption in Nevada bankruptcy law. In Nevada, you can keep a car in bankruptcy up to $15,000. If your vehicle is worth $15,000 or less, you can claim an exemption to cover the cost of the vehicle, and then you keep the car. Nevada Revised Statutes 21.090 and Nevada Revised Statutes 21.090 list the rules for vehicle exemptions in Nevada bankruptcy law. If youre disabled, you can claim a vehicle exemption up to an unlimited amount.
The car exemption in Nevada bankruptcy law applies to the equity in the vehicle. That means if you have a car thats worth more than $15,000, if you have equity thats less than $15,000, you can protect the vehicle as part of your vehicle exemption. The purpose of the vehicle exemption is to allow you to keep the vehicle that you need to drive up to a certain value.
The car exemption is one of many exemptions in Nevada bankruptcy law. Theres also a generous exemption for your home. Exemptions allow you to keep the things that you need the most. In exchange for wiping out your debts, you give up the property that isnt exempt. The car exemption allows you to keep your vehicle as long as you dont claim more than $15,000 for the value of the vehicle. Also, remember that married couples filing for bankruptcy can double the exemptions that apply to jointly-owned property.
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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What About Chapter 13
Now that you have a basic understanding of how Chapter 7 bankruptcy works in regards to keeping your car lets talk about Chapter 13. Chapter 13 is often a better option if you want to keep your vehicle. In Chapter 13, a repayment plan is created to help you repay outstanding debts. Unsecured debts are discharged if you complete the plan successfully.
Chapter 13 is a good option if you have a fair amount of equity in your car. The equity will be considered part of the foundation that determines your payment plan. If youre behind on your car payments, a plan to catch them up will be included in your Chapter 13 plan.
Assets arent liquidated in Chapter 13. Instead, they become the basis of the calculations for your ability to pay. The value of your car is determined by the same method as that for Chapter 7. This is because creditors must receive the same amount for a debt in a Chapter 13 filing as they would in a Chapter 7 filing.
The bankruptcy court can make changes to your loan terms if youve owned your car for more than 910 days . The court can have your interest rate lowered. They can also rule that what you owe is what the car is worth now instead of what you originally paid for it. Lenders have to agree to whatever terms the court sets for repayment.
If you are worried about your car or other possessions as you are considering filing for bankruptcy, its time to sit down with a qualified bankruptcy attorney who can walk you through the process.
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What If I Still Owe On My Car
Unlike some other types of bankruptcy, there is no option to refinance and catch up on payments under Chapter 7 bankruptcy, as the U.S. Courts explain. You will need to work out a payment plan with the financing company before filing your petition for bankruptcy if you are behind in your payments but hope to keep your car.
If you do not, the loan will likely be listed for discharge, prompting them to repossess the vehicle.
You can also consider other options, including:
Take Your First Step Towards A Debt Free Life
If you are overwhelmed by debt and live in the Toronto area, call us at 416-498-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you.
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How To Keep A Car Using Chapter 7 Bankruptcy Exemptions
You don’t lose everything you own when filing for bankruptcy. You keep “exempt” property that you’ll need to work and maintain a household. Exempt property varies by state, but most people retain household furnishings, a retirement account, some equity in a house and car, and more.
In Chapter 7, you’ll lose nonexempt propertythings you can’t protect with an exemption. The bankruptcy trustee who manages your case will sell your nonexempt property and distribute the money to creditors.
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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What Happens To My Car If I File Bankruptcy
Very few people who declare bankruptcy in Canada lose their vehicle. You need your car to get to work, so losing your vehicle is not an option. All provinces have laws that exempt one car or truck worth up to a certain dollar limit from seizure by the trustee. To find what happens to your car after you file bankruptcy, we look at two key questions:
The first question that you will be asked is what is your car worth? To determine this youll need to have the vehicle appraised. Most trustees will accept an independent value of opinion that is, the opinion of someone who is qualified to sell cars or value cars, that is not related to you or a friend, that is willing to write out a letter indicating what they believe the fair market value of your car is. Fair market value is the amount that someone would pay for your car.
The second question will be is your car financed or do you have clear title to your car? Clear title means that there are no liens or other claims to your car. A lien is the technical term for pledging your car as security for a debt. In other words, is your car financed, leased or has another creditor placed a secured charged against your vehicle.
If you file bankruptcy, there are options that can allow you to keep your vehicle no matter its value. You can also choose to keep, or hand back, a leased or financed vehicle depending on what makes the most sense for you financially.
If I File Bankruptcy Can I Keep My Car In Chapter 7 Bankruptcy
This is an excellent choice if you wish to protect all equity and that is current on payments. It allows you to keep your car if youre able to exempt all equity.
If you fail to exempt all your equity, then the court trustee will auction your car and proceeds are used to pay your creditors.
In some instances, trustees allow you to pay for your nonexempt equity at a discount. You are given a chance to choose from the following options:
- Pay with your post-bankruptcy income for a given period
- Ask for help from family and friends
Youll need to consider the car loan in cases where youve financed your car. Below are the choices you have:
- Reaffirm the car loan
You can opt to continue paying for the loan if you opt to keep the car. The lender allows you to sign a reaffirmation agreement. This renews the old contract based on the original loan terms.
The condition attached to this is that if youre unable to continue with the loan repayment in the future, youll be responsible for the balance after the car proceeds.
- Redeem the car for its value
Lenders allow you to pay a lump sum amount for the cost of the car and youre allowed to keep it. Any remaining balance of the cost of the car is discharged.
- Surrender the car to the lender
This is the best option if the cars value is lower than what you owe the lender. You can also surrender the car to the lender if the interest rates are very high.
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