Will I be able to keep my car when I file bankruptcy?
Many debtors are concerned that if they file bankruptcy they may lose their automobile. So can you keep your car if you file bankruptcy? Yes, it may be possible to keep your car, but it will depend on whether you have a loan, you lease your vehicle, you own your vehicle outright, whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy and your state's bankruptcy exemptions.
Loans, Bankruptcy, and your car
If you have a car loan and you owe money on your vehicle you have two choices to keep your car. First, you can re-affirm the vehicle debt and not include the vehicle loan in your bankruptcy. If you choose to re-affirm your debt you will be expected to continue to make loan payments or the creditor will have the legal right (per your car loan agreement) to repossess your car.
Your second option is to pay off the remaining balance of your car loan. Under some conditions you may be able to pay an amount equal to the value of the car rather than the amount owed for the car loan. Talk to a bankruptcy lawyer if you have questions about this option.
Leases, bankruptcy, and your car
What if have a lease for your car? Leases may allow you to keep your vehicle if you file bankruptcy, but you will also have to continue to make car payments.
Vehicle Ownership and bankruptcy
What if you own your car and you do not have a car loan?
State bankruptcy exemptions may protect all or part of the value of the car if you declare Chapter 7 Bankruptcy. In bankruptcy it is likely that your primary vehicle may be exempt, which means the trustee will not have the legal right to take your car, sell it and use the proceeds from the sell to repay your creditors. Whether or not your car will be exempt, however, will depend on whether the value of your car exceeds a certain amount. This threshold varies depending on where you live and is governed by a combination of federal and state laws.
What about second cars? In most cases if you file Chapter 7 bankruptcy any additional cars you own will be considered non-exempt property and will need to be turned over to the trustee to be sold to help pay off your creditors.
Chapter 13 and your car
If you file Chapter 13 bankruptcy you will not have your debts immediately discharged, and you will instead have to complete a 3 or 5 year bankruptcy repayment plan to repay both unsecured and secured debts. You will be able to keep your car as long as you continue to make payments. You may also be able to include car payments which are in arrears in your plan and pay them too.
Can a bankruptcy attorney help me keep my vehicle?
If you have assets you want to protect, whether you are filing Chapter 7 or Chapter 13 bankruptcy, it's a good idea to talk to a bankruptcy lawyer. A bankruptcy attorney can evaluate your vehicle value and your ownership/lease agreement and your total financial position and how the bankruptcy laws treat vehicles where you live.
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