Filing Bankruptcy When The Car Accident Wasnt Your Fault
Auto accidents can be devastating physically, practically, and financially. In addition to causing personal injury, they can force victims to assume a great deal of debt that they may not be in a position to pay down. From medical expenses to repairing a vehicle, making up for lost wages and addressing property damage, the aftermath of a motor vehicle accident can be frustratingly expensive.
If the car accident you were involved in was either not your fault or less than 49% your fault, a personal injury attorney can help you to file an accident claim with the goal of obtaining a personal injury settlement from the at-fault party and/or their insurance company. However, not all legitimate personal injury claims are ultimately so successful that they result in the kind of damage award amount that the victim deserves.
For example, if you were the victim of a hit-and-run scenario, you may be unable to sue the at-fault party and/or their insurance carrier. Similarly, if the at-fault party doesnât have car insurance coverage, there may be no way to secure compensation to cover all the bills youâve incurred since the time of the accident. If this is the case, choosing to file bankruptcy may be the best option available to you.
What If I Have Clear Title Against My Car
If you own your car free-and-clear you will have the chance to pay the trustee the fair market value of your car and you will be able to keep your car in bankruptcy or, if you are unable or do not want to pay the fair market value, you will have to surrender your car to your trustee who will sell the vehicle and distribute the funds to your creditors who are listed in your bankruptcy.
If you still have questions about keeping your car in bankruptcy you can schedule a confidential meeting with a trustee to discuss everything about bankruptcy and your car.
Learn About Exemptions Reaffirmation And More To See If You Can Keep Your Car
By Cara O’Neill, Attorney
Keeping a car in Chapter 7 bankruptcy is a top priority for almost all filers. Your ability to do so will depend on:
- the vehicle equity
- the exemptions available to you to protect it
- if you’re current on your payment, and
- whether you can stay current after bankruptcy.
Learn more about property in bankruptcy.
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Dont Put Your Car In Limbo When You File For Bankruptcy
Owning a car plays a big role in your financial health. Without a car, it may be difficult to go to a job interview or pick up your kids and or buy groceries. The last thing you need to worry about is losing this important resource when you file for bankruptcy.
Going bankrupt can be complicated, so its important to be well informed of the specifics. After all, the kind of bankruptcy you enter into determines the status of assets like your car.
If youre filing for bankruptcy and want to keep your car, then you should call Husker Law in Omaha at . We have the experience and knowledge you need to keep your car!
1055 N 115th St, Ste 302, Omaha, NE 68154
The Vehicle Is Your Primary Means Of Transport
The vehicle needs to be used by you primarily as a means of transport. This can include various types of vehicles such as:
- bicycle or
This doesn’t include caravans, motorhomes and campervans. Your trustee can sell these even if they are under the equity set amount.
Your trustee can claim vehicles that you don’t use primarily for transport. For example, you own an unregistered motorbike as a collectors item.
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If You Disagree With The Decision To Sell An Item
If you think the official receiver is acting unreasonably in taking or selling something you own, you can challenge the decision. You’ll need to apply to the court to do this.
You should talk to an adviser and try asking the official receiver to change their mind before you decide whether to apply to the court.
What Does Bankruptcy Do
Bankruptcy is a legal way for people who are deeply in debt to get back on their feet. Its handled by a court. A judge and court trustee review the assets of the person who is filing, as well as what they owe and to whom. The court decides whether to discharge the debts, which means the person who has filed bankruptcy is no longer legally required to pay them.
There are different types of bankruptcy depending on the financial situation of the person who is filing. Chapter 7 is the most common for individuals filling bankruptcy, followed by Chapter 13. Individuals can also file Chapter 11, but it is rare and costly.
You dont necessarily get to decide which type youll file for. When a person files for Chapter 7, theyre subject to the U.S. Bankruptcy Courts Chapter 7 means test. The test determines whether the person filing actually may be able to repay some of their debt. If a person has enough income that the judge believes they can pay down debt under a repayment plan, the judge may not approve the Chapter 7 filing. In that case, the person may file for Chapter 13.
This explanation, by the way, is simplified. Bankruptcy is complicated with a lot of ins and outs, and its best to get advice from a bankruptcy lawyer or credit counselor before taking the plunge.
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Dealing With Your Car In Chapter 7 Bankruptcy
If you want to keep your car, you must apply the Chapter 7 property exemptions to exempt the equity in your car and protect it from being taken by the Chapter 7 Trustee.
If you cannot afford to keep your car, or the car is damaged or you do not wish to keep the car, then you can legally surrender the car to the car lender in your Chapter 7 filing. You will either take the car to your dealership, or the car lender will repossess it.
You must maintain insurance on the car until it is no longer in your possession. If it suffers any damage between the date of your filing and the date you actually surrender possession and it is not insured, you may have to pay the amount of the damage. When you get your Chapter 7 discharged, you will also be discharged of the unpaid portion of your car loan. You may also surrender a leased car in the same way.
Keep in mind that there is an If You File For Bankruptcy, What Happens to Your Car?
Once the bankruptcy paperwork is filed, we will be contacted by the car lender or creditor. You have the option to surrender the car at no financial penalty or you can keep the vehicle and sign a re-affirmation agreement. This states that you will continue to make regular payments on the debt. This is a proposal that is drafted by your lender and sometimes the terms they propose are better than your current contract, such as:
- Reduced Interest Rate
- Extended terms for the loan
- Reduction in the value of the vehicle for the balance of the contract.
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Bankruptcy Exemptions In Alberta:
- Enough food for you and your dependants for the next 12 months
- Clothing for you and/or your dependants up to $4,000
- Household furnishings and appliances up to $4,000
- One motor vehicle up to $5,000
- Tools of your trade up to $10,000
- No limit on medical and dental aids
- Your principal residence up to $40,000 if you co-own your home, this amount will be reduced based on how much of the home you own
- Social allowance, handicap benefit or a widows pension as long as the proceeds from the payment are separate from your other funds
- RRSPs, RESPs and pensions
- Certain life insurance policies
Bankruptcy Exemptions In Nunavut:
- No limit on household furniture and appliances
- No limit on clothes for you and your family
- No limit on medical or dental aids
- Enough food and fuel for 12 months
- No limit on hunting tools or tools of the trade
- Up to $35,000 of equity in your home
- Certain pensions and life insurance policies
Ontario bankruptcy exemptions
You may be afraid that you will lose everything if you file for bankruptcy, but this is not the case in Ontario. Here are the provincial bankruptcy exemptions that allow you to keep certain assets and possessions.
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What Happens When You Declare Bankruptcy
In Canada, only a Licensed Insolvency Trustee can file the paperwork for bankruptcy. When you declare bankruptcy, you meet with a Trustee to discuss your situation. If bankruptcy seems the most beneficial course, the Trustee will prepare the paperwork to file for bankruptcy. See our page: How to File Bankruptcy.
Once the paperwork is signed, your Licensed Insolvency Trustee will electronically transmit your bankruptcy information to the Office of the Superintendent of Bankruptcy in Ottawa . The Superintendent of Bankruptcy will inform the credit bureaus of your bankruptcy.
Within five days of the bankruptcy starting, your Trustee will send a copy of your bankruptcy paperwork to each of your creditors, so that they can file a claim with the Trustee.
What Happens To The Co
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If you have bought a car and your loan has a co-signer, you may wonder what will happen to the co-signer when you file bankruptcy. This article explains your options and how they’ll affect your co-signer.
Written byAttorney Andrea Wimmer.
How a Chapter 7 filing affects your co-signer depends on what you decide to do with your car and car loan. The co-signer is viewed as the âbackup planâ for repayment of the loan. The person who cosigned the auto loan is responsible for the debt if you donât pay it â even if you donât pay it due to bankruptcy. How the car loan is treated in the bankruptcy will affect both you and your co-signer in different ways.
Since your car loan is a secured debt, you will have to complete Official Form 108, the Statement of Intentions to let the creditor and the court know what you want to do with the vehicle. You also have to list your co-signer on your forms following the steps outlined in this article.
No matter what you choose, your bankruptcy will not relieve your co-signer from their obligation to pay the debt.
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What To Do If Your Car Is Repossessed And You File Bankruptcy
In your repayment plan, youll need to provide for the payment of the arrearage and be able to continue making your monthly payments. If your car has been repossessed and you plan to file for Chapter 13 bankruptcy, contact an attorney immediately. (To learn more, see My lender repossessed my car right before bankruptcy.
What Kind Of Debt Is A Vehicle Lease
Most people understand that a car loan is a debt, but what about a lease?
A car lease is a financial agreement between you and the car leasing company to pay for the cars use over a specific period. The car lessor owns the vehicle, and in exchange for the right to use the vehicle, you have fixed monthly payments for the duration of the agreement. Since you legally owe money under contract, you have a debt equivalent to the remaining payments.
When you file for bankruptcy, all your debts need to be listed, so if you have a vehicle lease, you need to notify your trustee.
Most debts in Canada fall under two categories: unsecured and secured. Unsecured debts include credit cards, lines of credit, or payday loans, for example. Vehicle loans, mortgages and any other debts tied to an asset are secured debts.
Vehicle leases are secured debts because the leasing company has a secured interest in the asset. While the debt will be listed on your Statement of Affairs as a secured debt, it is not dischargeable by bankruptcy.
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Bankruptcy And Joint Home With Ex
Its not uncommon for a separated couple to still own a home together pending formal distribution of the marital assets. If you file bankruptcy during your divorce, but before any divorce or separation agreement is finalized, any assets you own at the time you file are subject to seizure in your bankruptcy including your share of the house even though you are no longer living there. Should you file for bankruptcy, your ex-spouse who currently resides in the home might be affected.
Like my previous example, the impact of bankruptcy on a joint home will all come down to how much equity is available.
If, pending completion of your divorce your ex-spouse lives in the home, your ex-spouse can work with your Trustee to buy out the equity, putting funds in your bankruptcy equivalent to the equity for the benefit your creditors, in exchange for a deed giving them full title to the property.
If the marital home is being sold as part of the divorce, the Trustee may register a lien on the property for the amount equal to the bankrupts share of the equity until a sale is completed. The lien will result in any sales proceeds being paid to the trustee ahead of the spouse, but after repayment of the mortgage.
Can A Car Loan Be Cramdown In Chapter 13
The cramdown option isnt limitless. It doesnt apply to new car loans , and it doesnt survive a Chapter 13 case that is dismissed rather than discharged. No cramdown for a recent property purchase. Cramdown isnt available on a loan used to buy a vehicle during the 910 days before filing the bankruptcy case.
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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:
Secured Car Loans And Leased Cars In Bankruptcy
First, if your car is security for a car loan, you can keep your car, but only if you continue making your car loan payments. This applies to both a car that is financed through a bank or other lender, or a car that is leased through an automotive finance company.
Before agreeing to continue making car payments, you should determine the value of the car, and the amount that remains owing on the loan. If there is significant negative equity, it may not be wise to keep the car.
For example, if you used your car as security for a $30,000 consolidation loan, and the car is only worth $5,000, it is not financially prudent to agree to pay $30,000 so that you can keep your $5,000 car. Unless the lender is willing to reduce the amount of the loan to more closely match the value of the car , it may be prudent to surrender the car to the lender when you file bankruptcy. The resulting shortfall is then included in your bankruptcy.
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Is Income A Deciding Factor
Its easy to think that you can simply file for bankruptcy. The truth of the matter is that its more complicated than it seems.
You should also know there are prerequisites to filing for chapter 7 bankruptcy. For example, if you pass a certain income threshold, your eligibility to file for chapter 7 will diminish rapidly.
Additionally, you should consider if you make enough money to cover any remaining payments. If you dont, it may be a good idea to just surrender the car entirely.
What Happens To Your Property When You File Bankruptcy
The moment you file a bankruptcy petition all your assets become part of the bankruptcy estate and can be seized by a Trustee and sold for the benefit of your creditors. Thankfully, the federal Bankruptcy Code includes many bankruptcy exemptions that take property or your equity in property out of the estate and out of reach of the Trustee.
Most debtors filing for bankruptcy relief keep all of the assets they want to keep by applying federal or state exemptions. It is only in the case of luxury goods or fully-owned real property that exemptions may not be enough to cover the value.
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