Surrendering The Car To The Lender
If you still owe a lot on your vehicle at high interest rates or if it was slated to be repossessed, you could let your car go back to the lender.
Car payments may have contributed to your need for bankruptcy in the first place. In Chapter 7 bankruptcy qualifying debt gets erased and your car payments can be included in your written discharge of debts if you surrender it.
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What Happens To Your Auto Loan If You File For Bankruptcy
The lender may repossess your car if you file for chapter 7 and arent in good standing with your loan. Because you havent kept up with your loan payments, your vehicle wont be protected by any exemptions.
Depending on your situation, you may be able to keep the car if you repay the rest of the loan in one lump sum or sign a reaffirmation agreement. In a reaffirmation agreement, you agree to pay for the car loan as you would if you hadnt filed for bankruptcy.
If you sign a reaffirmation agreement and decide you dont want to keep your car, you can rescind or cancel it. Youll need to do so within 60 days after you sign the agreement or before the court gets involved with your discharge whichever option is later. You wont have to pay for your vehicle if you rescind and return it in time.
When it comes to chapter 13 bankruptcy and your car loan, the amount you owe on it may be reduced, especially if you owe more than its worth. In addition, if youre eligible for a repayment plan and catch up on your loan, you might be able to keep your car.
Car Loans During Bankruptcy
There is another advantage to having a car loan during bankruptcy, as well as just getting to keep your vehicle.
It is that it can help to improve your credit too.
Of course, this can be valuable, indeed.
The reason being that bankruptcy can harm your credit rating for 7-14 years after its completed.
Therefore, by keeping your loan open and paying it regularly and on time, you can help to minimise the damage to your credit rating and get back to financial normalcy faster.
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Keeping Your Car In Bankruptcy Starts With Calculating Equity
Everyone who owns a car and files for bankruptcy will need to calculate their vehicle’s equity. Here’s how to calculate vehicle equity for bankruptcy:
All the equity you can protect is known as “exempt equity.” Any portion not covered by an exemption is “nonexempt equity.”
Exemptions For Your Home
In British Columbia, homeowners exemptions are higher if you live in Vancouver or Victoria. In this case, $12,000 of the equity in your home is protected in Greater Vancouver and the Victoria capital area. Elsewhere in the province, $9,000 in home equity is exempt from bankruptcy. For more information on bankruptcy exemptions in British Columbia, you can request a call from a local Licensed Insolvency Trustee.
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You Could Keep Your Car Through The Motor Vehicle Exemption
You need to check whether your state has laws on Motor Vehicle Exemption . State and federal exemptions will be able to protect some or all of the equity that you have on your car.
Depending on where you reside, the amount of equity that can be exempted from your vehicle will vary. Some states, however, will allow you to use the exemption amount set by the federal government to keep your auto.
The federal exemption on motor vehicles is currently set at $4,000. Some states have a lower exempt value, while others are more generous. Texas, for instance, will allow you to exempt the entire value of one vehicle per licensed household member.
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Can I Keep My Car
If you file Chapter 7 and you own a vehicle outright, you can keep the car if it is worth $6,400 or less by using your Illinois motor vehicle and personal property exemptions.
Alternatively, if you have a note secured by your vehicle, you can keep the car by reaffirming the note, which means you agree to continue making the payments despite the bankruptcy.
You also can use redemption to keep your vehicle. Redemption requires you to pay the fair market value of the vehicle in full. This is a useful remedy if you are upside down on a vehicle. A handful of finance companies offer redemption loans that are repaid like an ordinary car loan.
Should I Purchase A Car Before Filing Bankruptcy
Clients often purchase vehicles before filing bankruptcy. Often this additional, necessary expense allows a client to pass the Means Test for a Chapter 7 or lower a Chapter 13 monthly plan payment.
A car loan is a secured debt as it is secured by the vehicle to which it is attached. Clients often assume that their loan is secured when they drive their new car off the lot. However, the creditor must perfect the lien by filing it with the Department of Motor Vehicles in order to provide third parties notice of the lien on the vehicle. In order to properly perfect the lien, it must be filed within thirty days after the purchase of the vehicle.
If the lien is placed more than thirty days after purchase of the vehicle, and a bankruptcy case is filed within ninety days from the date of the placement of the lien, the Bankruptcy Trustee has the power to strip the lien and sell the vehicle. A client going into a Bankruptcy generally needs their vehicle to get to and from work, school, medical appointments, or other important destinations, and obviously, losing their new vehicle would be a substantial blow to their wellbeing and livelihood. A knowledgeable Bankruptcy attorney is always on the lookout for this situation and will likely advise a client to wait ninety days from the placement of the lien before filing their Bankruptcy case.
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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.
What Happens To Your Car When You File For Bankruptcy
Are you thinking about filing for bankruptcy but arent sure what will happen to your vehicle? Heres what happens to your car when you file for bankruptcy.
Are you considering filing for bankruptcy? Are you worried about what can happen to your assets should the process go through? Well, youre not the only one.
Over half a million people in the U.S. filed for bankruptcy in 2020. While everyones reasons for bankruptcy vary, one thing is certain, youre probably questioning whether to not youll be able to keep your car.
A car is more than a vehicle it is a lifeline that can keep you going in the most difficult times. Make sure to keep reading to find out if youll be able to keep yours if you file for bankruptcy.
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Discuss Your Options With An Experienced Bankruptcy Attorney
Working with an experienced bankruptcy attorney may make it easier to understand the impact that bankruptcy could have on keeping your car or buying a different one. Legal counsel can outline the eligibility requirements of Chapter 13 and help to prepare the payment plan to be submitted to the court for its approval.
Learn how filing for bankruptcy can help protect your car by scheduling a free initial consultation with our lawyers. We have offices in Louisville, Frankfort and New Albany. Call us at or send us an email.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
Keeping A Car After Filing Chapter 13 Bankruptcy On A Car Loan
If you’re behind on your payments, consider filing for Chapter 13 bankruptcy. You can pay off the vehicle balance over three to five years in a Chapter 13 repayment plan and keep the car.
But if you don’t make the payments, including catching up on any arrearages on the car loan, the lender can repossess your car in Chapter 13 bankruptcy. Learn more about your car in Chapter 13 bankruptcy.
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What Does That Mean For You
If youâre current with your mortgage payments â¡ï¸ everything will stay basically the same.
Youâll continue to make your mortgage payments until the house is paid off. Of course, there are some legal nuances, like the discharge of your personal liability on the home loan, and how it protects you in the event you lose your home down the road, but the important takeaway here is this:
If you have enough income to pay your mortgage lender, you can keep your home even after filing Chapter 7 bankruptcy.
Itâs a little more complicated if your home is worth more than what you owe on your mortgage. In that case, you may have to deal with the bankruptcy trustee. More on that below.
Will A Chapter 13 Bankruptcy Protect My Car
Chapter 13 bankruptcy allows for a reorganization of your debts. For those wishing to protect their vehicle, the benefits of filing for Chapter 13 bankruptcy include:
- The potential for lower monthly payments and interest rates
- The ability to repay both past due and current payments over an extended period
- The ability to potentially keep your car even with overdue payments
- The ability to get your car back after repossession if it has not yet been sold
Chapter 13 can offer you more financial flexibility by allowing you to pay off your debts over an extended period. This can allow for more room to pay off your car payment.
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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.
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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.
Do I Get To Keep My Car In A Chapter 7 Bankruptcy
The question of whether or not you can keep your car in a Chapter 7 bankruptcy process is a very common one.
Unfortunately, as is so often the case with bankruptcy matters, the answer is, It depends.
Normally, in a Chapter 7 bankruptcy, your goal is to wipe out your unsecured debt. It is not necessarily always also the case that you want to slide out from under a burdensome vehicle loan, although this is sometimes true.
Many are concerned that, if they file for bankruptcy, they will lose a needed vehicle, leaving them unable to commute to work, get to doctors appointments, shuttle kids back and forth to school, and to attend lifes other necessities.
The fear of losing a car can cause people to hold off on even having an initial conversation with a bankruptcy attorney.
It is important, first of all, to not be alarmed. Fear should not prevent you from exploring your legal options.
In a typical Chapter 7 bankruptcy case, most people do get to keep their carsif they want to.
However, whether or not you can will depend, firstly, on whether you are still making payments on the car or whether your own it free of any title-encumbering lien.
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Can I File Bankruptcy And Keep My House And Car
It depends on the chapter of bankruptcy, the status of the house and car loans, and your current financial situation. Both types of bankruptcy make it easier to keep a car than your home. However, if you are up to date with your mortgage payments, youll have an easier time saving your home.
Regardless, youll need to prove your commitment to home and auto lenders by agreeing to their terms. Chapter 13 bankruptcy requires court approval for your repayment plan, while Chapter 7 is contingent on your previous history with the mortgage lender.
