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What Happens To Your Car If You File Bankruptcy

How To Avoid Losing My Car

If You File For Bankruptcy, What Happens to Your Car?

While nothing can be guaranteed in a Chapter 7 bankruptcy filing, the best way to ensure you have done everything possible to keep your car is to consult with an experienced lawyer. The lawyers at Cravens & Noll Bankruptcy Law Group have years of experience in protecting you and your property.

Are you concerned about losing your car while filing? Contact us now for your initial bankruptcy consultation.

Ch. 7 Bankruptcy Lawyer Info

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.

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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Filing Bankruptcy When You Own The Car

A car loan is a secured debt, which means the car is collateral that can be taken back by the lender if you dont pay. When you file for Chapter 7 bankruptcy, you must list your assets on a form called Schedule A/B. Your car is an asset, because it has value. You must also file a statement of intention that that tells the court whether you plan to reaffirm your car loan, redeem the car or surrender it. If the statement of intention isnt filed within 30 days of when the bankruptcy is filed, the car loan is no longer part of the bankruptcy proceeding.

The first step to keeping your car if youre considering bankruptcy, is to determine its status. Youre either paying a loan, leasing or you own it free and clear. The status determines what you have to do to keep your car.

If youre making monthly payments on a car, its either a loan or a lease. If youre not sure which, check your agreement. If its a lease, you are renting the car and there are mileage limits that add costs when the lease ends and you return the car to the dealer.

If you are making monthly payments on a loan, the lender holds the title as collateral. Once youve paid for the car, you get the title and own it free and clear. If you cant make payments, the lender takes back the car back, which is repossession.

Being up to date on your car payments before you file for bankruptcy makes it much more likely youll keep your car when you file for either Chapter 7 or Chapter 13.

Secured Car Debts In Bankruptcy

What Happens to Your Car When You File Bankruptcy

Ben is a 31 year old delivery driver. He lives in Launceston, Tasmania and earns $55,000 per year. He has credit card debts of about $48,000.

Ben is paying off a 2011 Holden Combo van worth $10,000. To buy it, he borrowed money from Island Bank who registered a security over the van on the Personal Property Securities Register. Ben currently owes Island Bank $9,000.

Ben finds his debts crippling. He has done some research and thinks bankruptcy would be his best option.

Before filing for bankruptcy he completes AFSA’s bankruptcy consequences tool and then creates an Insolvency Services account so he can apply online.

Bens main concern about going bankrupt is that he does not want to lose his van. He needs this for his job. He does not want to put details of the van and the loan on his Bankruptcy Form. Ben rings AFSA to get more information. AFSA tells Ben that its important to list all his debts and assets on his Bankruptcy Form and there are penalties for not doing so. They also tell Ben that if he forgets to include any debts, he must notify his trustee as soon as he becomes aware of them.

If Bens situation changes in the future and he can no longer keep up the loan payments, Ben could surrender the van to the bank. If this did happen, any money still owing on the loan would be covered by his bankruptcy and Island Bank could not pursue Ben for the debt.

*The limit is updated each financial year. You can find the latest limits at Indexed Amounts

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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.

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.

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Three Options For Your Car Loan In Bankruptcy

If you still owe money to a finance company or bank for a loan taken out to buy the car, then things get a little more involved. Under the Bankruptcy Code, you have one of three choices when it comes to the car and the loan:

  • you can turn in the car with no liability for a repossession deficiency down the road
  • pay off the loan, or redeem it or
  • reaffirm the debt, which would result in the car loan not being wiped out by the bankruptcy , and if the car gets repossessed after the bankruptcy is over, you would be responsible for any deficiency after its sale.
  • Naturally, this last one should only be done after careful discussion with a lawyer.

    How Payday Loans Work

    What happens to my car loan in bankruptcy?

    Payday loans are typically available online or at in-person locations. Lenders make it easy to get these loans. Thereâs usually no credit check. This streamlines the process and makes it easier for borrowers with a bad credit history to get approved.

    Along with your application, a payday lender will typically request identification and evidence of your earnings like a driverâs license and a pay stub. They will also likely require you to provide a way they can be repaid. This may be either a post-dated personal check made out to the lender or your permission for them to electronically withdraw money from your checking account . Online lenders typically just ask for the account information.

    The lender will give you the loan funds in cash or by check, or it will direct deposit funds into your checking account. Youâll usually get the cash or check the same day, but it may take up to two days for a direct deposit into your account.

    Most payday loans are repaid with a single payment at the end of the term. How you make the payment may depend on how you took out the loan. Some in-store lenders encourage you to return to the store to repay the loan. If you donât return, the lender will cash the check you provided or withdraw funds from your account. Online lenders typically access your checking account for repayment.

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    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.

    Can I Keep My Car If I File Chapter 7 Bankruptcy In Georgia

    Due to the lack of comprehensive public transportation and the distance between the suburbs and the city in the Atlanta metro area, many Atlanta residents who file bankruptcy are concerned about keeping their cars after filing bankruptcy under Chapter 7 so that they can continue to work.

    The good news is that you can keep your car if you file Chapter 7 bankruptcy. If you own a car and file Chapter 7 bankruptcy you have three possible options regarding your car: you can surrender the car you can reaffirm the loan or, under certain circumstances, you can redeem the vehicle. These options are available for debtors who still have loans on their cars. Debtors who own their cars free and clear may keep their cars, as long as the cars are not worth more than the exemption for vehicles in Georgia.

    Surrendering the vehicle in bankruptcy is a relatively straightforward process. You return the vehicle to the creditor, and your obligation on the loan ends, along with your ownership of the car. You may allow the creditor to pick the car up at your home or make arrangements to drop the vehicle off at the nearest location for that creditor.

    If you are considering filing for bankruptcy please consult a qualified attorney. For a free consultation please contact the Law Offices of Charles Clapp at 585-0040 or email for more information.

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    Keeping Your Car In Chapter 7 Bankruptcy

    In Chapter 7 bankruptcy, most of your debts are discharged . In return, you must give up nonexempt property — the bankruptcy trustee sells the property and uses the proceeds to pay your unsecured creditors.

    Whether you can keep your car in Chapter 7 depends on whether your equity is exempt, and whether you are behind in payments.

    Beware Of Tow Trucks After Discharge

    What happens to your car, when you file for bankruptcy?

    If you have not reaffirmed, the creditor has a right to repo even if you are up to date with the payments but many of the creditors have a policy against that unless you geet behind in your payments. If I can find out that your lender generally does not repo unless you are behind in payments, I might advise against reaffirming. If you have a creditor which says you don’t need to reaffirm, that’s probably a good thing but watch out for the following.

    I always try to warn my clients about this. It might not make much sense, but you have to keep this in mind. If you had a Chapter 7 and you did not reaffirm and you are now discharged, the lender will tend to consider itself to be under a court order to not bother you or disturb you in any way. Although they can now repo, they are still prohibited from trying to collect the debt. They might be afraid to send you monthly statements, and certainly might be afraid to write you a letter or call you on the phone. If you are behind in your car payments, unlike before the bankruptcy, you might not receive any warning letters or phone calls.

    Under those circumstances, you just might see your car heading down the street hanging off the back of a tow truck with no warning whatsoever. You must, just really have to, stay up to date with your payments so this won’t happen. Don’t expect a warning before the tow truck comes.

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    What Happens To Your Car In Chapter 13 Bankruptcy

    Another form of bankruptcy is Chapter 13, which works a bit differently from Chapter 7. Rather than liquidating non-exempt assets to repay creditors, you’ll enter a debt repayment plan. Your property isn’t sold off with this form of bankruptcy instead, your finances are reorganized and you’ll begin the process of repayment. If you own your car outright you’ll be able to keep it.

    You will have a repayment period of either three or five years, and once that period ends, some remaining debts can be dischargedmeaning you don’t have to pay them anymore. Not all debts can be discharged, however. Credit card and medical debt can be discharged, for example, but mortgages and student loans cannot.

    When you file Chapter 13 bankruptcy, your debt is grouped into three buckets:

    • Priority debts: These must be repaid in full. This includes bankruptcy costs, unpaid tax bills from the past three years, and child and spousal support.
    • Secured debts: Car loans are included in this category. If you have a car loan, the amount you owe on it may be reduced in the Chapter 13 bankruptcy process if you owe more on it than its current value. Also, if you can qualify for a repayment plan and get caught up on your loan, you may be able to keep the vehicle.
    • Unsecured debts: These will be discharged in the bankruptcy after you’ve completed your repayment plan.

    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.

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