Can I Keep My Car If I File Chapter 7 Bankruptcy In Pennsylvania
Filing for bankruptcy can be a frightening proposition if youre concerned about the future of your personal property. You may be most concerned about whether youll be able to keep your car. Skilled bankruptcy attorneys get this question all the time. And as we try to explain it, we discover there are many misunderstandings as to the ways in which Bankruptcy Law protects your car. Call the Pennsylvania Chapter 7 bankruptcy attorneys of Young, Marr & Associates if you are contemplating filing for bankruptcy, and you want to keep your vehicle. We offer free and confidential consultations at this critical juncture of your life. Call us at 607-7478 to schedule a free consultation.
If I File Chapter 7 In Pennsylvania Can I Keep My Car
Outside of major cities like Philadelphia, most Pennsylvanians rely on their cars to commute, attend school, run errands, and transport family members. For all of these reasons, losing your car can be devastating especially if you dont have access to reliable public transportation.
Fortunately, you may be able to keep your car if you file for Chapter 7 bankruptcy. It depends on how much your vehicle is worth, whether you are up to date on your auto loan payments, and whether you decide to use the state or federal bankruptcy exemptions.
If you owe unpaid car loan payments, you will typically not be able to keep the vehicle, even with bankruptcy exemptions, unless you can catch up prior to filing. If youre behind on your auto loan payments, there are two basic strategies for getting current and preventing the sale of your vehicle:
Chapter 7 Bankruptcy When A Car Is Free And Clear
What if the vehicle is paid in full, with no lien encumbering its title? Do you still get to keep it in a Chapter 7 bankruptcy in that case?
That depends as welland it depends primarily upon the value of the car.
A Chapter 7 bankruptcy is a liquidation bankruptcy.
That is, in return for the benefit of walking away from your dischargeable debt without repaying any of it, your assets are subject to liquidation in the Chapter 7 process in order to generate a pool of money for at least partial repayment of the debts you owe.
The majority of people who file Chapter 7 bankruptcy do not lose much property, despite this.
The Bankruptcy Code and Alabama State law allow you to protect certain types of property from liquidation up to certain dollar value caps.
Thus, the valuation of the car plays a significant role in the question of whether it can be protected in an Alabama Chapter 7 bankruptcy proceeding.
For example, if you have a $40,000 paid-for SUV and you file a Chapter 7 bankruptcy case, you are more than likely going to lose that SUV.
The Chapter 7 Trustee assigned to your case by the Bankruptcy Court is tasked with the job of seizing and liquidating property for the benefit of your creditors. Any Alabama Chapter 7 Trustee would be highly interested in a $40,000 SUV with a free-and-clear title.
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Cars Serving As Security For A Loan
The other issue many people seeking to keep vehicles in a Chapter 7 bankruptcy case must address is any outstanding loan balance. If the car serves as security for a loan, the bankruptcy petitioner obviously cant just discharge the outstanding debt and keep the car for free. There are generally three options available to a person who enters Chapter 7 bankruptcy with a secured automobile.
First, the bankruptcy filer may choose to surrender the vehicle. Even those who need a car to get around sometimes choose this option. Some reasons people surrender vehicles in Chapter 7 bankruptcy include:
- Knowing or fearing that they will be unable to keep up payments after the bankruptcy, and
- Opting to get out from under a loan when the remaining balance is greater than the value of the car
When a vehicle is surrendered in bankruptcy, the outstanding loan balance becomes unsecured, and so can be discharged in bankruptcy.
Depending on finances, keeping the car and continuing to pay on the loan may also be an option. There are two ways this can happen. One is to simply continue to make payments. However, this option isnt always available. Some lenders will not allow a bankruptcy filer to keep the car and continue to make payments without a formal agreement. Others may continue to accept payments but stop sending statements and reporting to credit reporting agencies.
Ohio Attorneys Helping You Keep Your Car
A lien on your car title can survive bankruptcy just like a mortgage on real property meaning the personal obligation can be discharged, but in this case, not the creditors lien on the vehicle.
If suitable arrangements are not made, the creditor may be entitled to repossess their collateral post bankruptcy when you are behind on payments.
The bankruptcy lawyers at Debra Booher & Associateshave handled more than 15,000 bankruptcies for our Ohio clients. Let us lend you a helping hand as well. Contact our bankruptcy law firm today to schedule your free debt relief consultation.
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Arlington Heights Bankruptcy Lawyers Warn Filers
Because such reaffirmations can pose risks to the filer, courts must review the terms before they enforce the agreements. If the judge approves the agreement, then it goes into force, and the filer must follow its terms until they pay off the car. If the judge denies it because they feel that the terms are not in the filer’s best interest, then the filer may still get to keep their car.
For more information about how bankruptcy will affect your property, please contact Newland & Newland today. We provide support to clients in Lake County, McHenry County, Cook County, DuPage County, Crystal Lake, Arlington Heights, Barrington, Palatine, Rolling Meadows and throughout Northern Illinois.
Impact Of Chapter 7 On Your Vehicle
If you are filing for bankruptcy under Chapter 7, you may be able to keep your car by using the exemption for it. Most states provide a bankruptcy exemption of a certain amount for a vehicle. If you are no longer making payments on a car, and it has no equity beyond the exemption, you can protect it entirely. On the other hand, people who are still making payments on a vehicle will need to decide whether keeping it makes sense in their situation. They may choose to surrender the car rather than trying to keep up with payments. If you notify the court that you will surrender your car, this will get rid of your car loan.
Some people need to choose between Chapter 7 and Chapter 13, which can involve evaluating many factors. If your car is an important factor, you can read more here about what might happen to your car under Chapter 13.
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May Can I Keep My Car If I File Chapter 7 In New York
If youre thinking about filing Chapter 7 in New York, youve probably wondered whether or not you will get to keep your car after you receive your discharge. If youre like most of us, youll still have a job to go to every day, so youll need a means of transportation to get there.
Its important to discuss your specific situation with a New York bankruptcy lawyer however, here is some general information to help you determine if you will be able to keep your car:
Heres one thing to keep in mind about reaffirmations, though if you cant make your payments, and your car is worth less than the loan balance, youll have to pay the difference even if the creditor takes your car!
Are You Behind In Your Car Payments
If you are behind in your car payments, you will lose your car in Chapter 7 bankruptcy unless you take care of the arrearage or get the lender to agree to some other payment plan.
Some options include:
Redeeming the Property
In Chapter 7 bankruptcy you can “redeem” a car by paying the lender the current replacement value of the car. You can only do this if the car is exempt or the trustee has “abandoned” the property . Because this requires a lump-sum payment, however, it’s often not feasible for people considering bankruptcy.
Reaffirming the Debt
You can keep the car if you and the lender sign a new payment agreement. You can change the terms of your original contract in this agreement, but the lender has to agree. The downside: If you later default on the loan, you will be liable for the deficiency balance.
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Faqs On Keeping Car After Bankruptcy
Is it better to surrender your car in Chapter 7?
Yes, its better to surrender your car when you file for Chapter 7 bankruptcy than wait for it to be repossessed. When you return the car, you will be free from your missed payments.
How soon can I buy a car after filing Chapter 7 bankruptcy when I lose my car?
You can buy a car after filing for bankruptcy in around three to six months since your debt has been discharged. Remember that you need to take certain steps to improve your credit score before you apply for a car loan.
When do I have to surrender my car in Chapter 7?
If youre behind on your car loan payments, the bankruptcy court will likely order you to surrender your car when you filed a bankruptcy case. If youre current on your payments, you may be able to keep it.
Can I keep 2 cars in Chapter 7?
Yes, you can keep two cars as long as you can protect the equity on both cars with the bankruptcy exemptions. You should also be current on your loan payments, and you should prove that you can continue to make car payments without experiencing undue financial hardship to you and your family.
Do I have to include my car loan in Chapter 7?
No. According to the Bankruptcy Code, you dont have to surrender all your assets when you file for bankruptcy, just like in Chapter 13 bankruptcy. However, your loan needs to be current if you want to keep your auto and you have to keep making payments to your car lender after bankruptcy.
Protecting Car Equity In Chapter 7
A Chapter 7 bankruptcy isn’t intended to deprive you of all of your property. Bankruptcy laws, called exemptions, let you keep a certain amount of your property to make a fresh start. Almost all people need a car to get to work, and most states have a motor vehicle exemption that will let you keep a modest vehicle.
Exemptions in Chapter 7 Bankruptcy
Each state has a set of exemptions, and the protections vary widely. Some states even allow a filer to choose between the state and federal bankruptcy exemption system. A filer can use whichever system will work best. While you keep exempt property, what will happen to your nonexempt propertyproperty not protected by an exemptionwill depend on the chapter you file. In Chapter 7, the trustee sells your nonexempt property for the benefit of your creditors. If your property is exempt, the Chapter 7 bankruptcy trustee can’t take it. Learn more about your property and exemptions.
How Motor Vehicle Exemptions Work
Whether you’ll be able to keep your car will depend on the exemption amount allowed by your state, as well as the amount of equity in it. For instance, if you own a car worth $5,000 and your state’s motor vehicle exemption is $7,000, the vehicle will be fully protected.
If the Motor Vehicle Exemption Doesn’t Cover the Equity
In Chapter 7 bankruptcy, here’s what the Chapter 7 bankruptcy trustee appointed to your case will do if you can’t protect all of the vehicle’s equity:
Using a Wildcard Exemption to Keep Your Car
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Beware Of Tow Trucks After Discharge
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.
Requirements For Keeping Your Car
The requirements for keeping your car vary from state to state. Motor vehicle exemptions in each state allow you to keep a car for a certain amount of exempted money.
For example, in Nevada, you can keep a car with up to $15,000 in equity, but in Wisconsin, the limit is $4,000. You may also elect to use the federal exemptions, meaning federal law governs. Your bankruptcy lawyer can help you decide whether to use the state or federal exemptions.
Your equity in the car is the current fair market value minus how much you still need to pay on your car loan. If the vehicle is valued at $25,000, but your car loan has $15,000 left, you have $10,000 in equity. If your state exempts $10,000 or more in equity, you can keep the car. If it allows less, the bankruptcy trustees might sell your car.
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Bankruptcy Exemptions Help Protect Most Of Your Day
Chapter 7 bankruptcy exemptions can be a tricky subject, with lots of very specific rules, requirements, and terms. However, they can also save you a lot of money and property during your bankruptcy process.
The more effort you invest in learning your exemption laws, the more you will be able to keep during your bankruptcy. Before you submit your filing, take the time to research your exemption rules or speak with a bankruptcy attorney about how exemptions can protect the property you care about the most.
How Can I Keep My Car During Bankruptcy
The best method to keep your car during a bankruptcy proceeding depends on whether you own your vehicle outright or you have debt on your vehicle. If you own your vehicle outright or even if you have some debt on your vehicle, you may be able to protect your vehicle under a standard exemption.
If youre behind in your payments, you may be able to reaffirm your vehicle loan or bring a motion to redeem the vehicle. The best course of action depends on the value of your car, the amount that you owe, and what your lender is willing to agree to.
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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.
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.
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