Sunday, April 21, 2024

Can I File Bankruptcy And Keep My Car Loan

Don't Miss

Will Michigan Bankruptcy Let Me Keep My Car

Can I Keep My Car if I File for Bankruptcy?

One of the largest concerns individuals have when filing bankruptcy is whether they can keep their motor vehicle. We all need to get to work, school, or life. Without the benefits of proper mass transit, many of us demand on our cards. In almost all cases, whether in Chapter 7 or Chapter 13 bankruptcy, you will be able to keep you vehicle.

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.

I Lease My Vehicle Or Am Paying A Loan For It Will I Need To Return It In A Bankruptcy

If your vehicle is leased, you will not be required to forfeit it in bankruptcy .

If your leasing or loan payments are reasonable, and if your account is in good standing with the financing company, you will be able to continue with your lease or loan arrangement and keep your vehicle.

However, you will need to assess whether your auto financing costs are affordable for you. For some consumers, high vehicle leasing costs are part of the reason they have become insolvent!

If this is the case your vehicle lease or loan payments are too high for your budget it is often best to surrender the vehicle before you file for bankruptcy. Why surrender your vehicle before you file? This is because in some cases you will still owe money to the auto financing company after you have turned in your vehicle. The same applies if you have been paying an auto loan with your vehicle as security.

You will still owe money if the current value of your vehicle has fallen below the amount you owe the financing company. In this case, the value of the returned vehicle will fall short of covering what you currently owe creating a shortfall.

If you turn in your leased or loaned vehicle, and the financing company gives you a bill for their shortfall, this debt can then be included in your bankruptcy.

Recommended Reading: Usaa Auto Financing

Options For Your Auto Loan In Chapter 7

There are generally three options for dealing with an auto loan during a Chapter 7 bankruptcy, and one of them doesn’t involve you keeping the car. Let’s take a look:

  • Surrender your vehicle This option doesn’t help you keep your financed car during your Chapter 7 bankruptcy, but it does allow you to avoid a confrontation with your lender, and possibly the repo man. Mainly though, it helps you to eliminate the debt you owe on your vehicle. If you surrender it, the lender sends a recovery company to come to collect your car after the court lifts the automatic stay which prevents collection actions from being taken during bankruptcy.
  • Reaffirm your loan When you sign a reaffirmation agreement with your lender, you agree to remain liable for the debt, and to not include your vehicle in the Chapter 7. The debt isn’t wiped away in your discharge with all your other debts, and you have to continue making payments even after the bankruptcy ends, or you’re going to be facing a swift repossession.
  • Redeem your car In order to redeem a vehicle, you have to pay the lender a lump sum payment for the current value of the car. In other words, you buy the vehicle right now for as much cash as it’s worth. This is a good option if there’s negative equity in the car, as the remaining difference between the vehicle’s value and what you owe on the loan is wiped out on discharge.
  • Can I Keep My Car If I File Chapter 7 Bankruptcy In Georgia

    If I File Bankruptcy Can I Keep My Car?

    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.

    Recommended Reading: Does Usaa Do Auto Loans

    Exemption Limits For Your Car

    In Ontario , bankruptcy exemptions permit you to keep your vehicle if you go bankrupt, provided your car or truck is worth less than $7,117, and there are no loans or liens registered against it.

    If your motor vehicle is worth more than $7,117, you would be required to pay to the trustee the amount over that limit. For example, if your car is appraised at $8,117, you would be required to pay $2,000 into your bankruptcy estate to keep your car when you go bankrupt.

    Can I Keep My House Or Car

    The Law Office of David M. Serafin has assisted numerous bankruptcy filers in Denver and other areas of Colorado not only stave off foreclosure or repossession, but also save money by filing for bankruptcy.

    Chapter 7

    In a chapter 7 bankruptcy, known for being a quick and simple means of eliminating debt, its still very possible to keep your house or car if the value of the property is under the applicable Colorado Homestead Exemption and so long as youre current on the mortgage or car payment. And, if your vehicle is upside down in equity, you may be eligible for a Section 722 Redemption. Redemption allows you to keep the vehicle by paying only for its fair market value if you can either pay in a lump sum the value of the vehicle or obtain financing to do this.

    Chapter 13

    Back when property values in Denver and the rest of Colorado were much lower due to the financial crises, we could file a motion to determine secured status of a second mortgage. If your house was upside down as to the first mortgage alone, the second mortgage could be stripped off . For example, the second mortgage could be stripped off and determined to be unsecured for a house worth $400,000 with payoffs on the first two mortgages of $420,000 and $50,000, respectively. In this example, the house would be underwater as to the first mortgage alone.

    Reaffirmation Agreements

    Recommended Reading: Can You Buy An Auction Home With A Fha Loan

    Unprotected Car Equity In Bankruptcy

    It’s not uncommon to have more equity in your car than you can exempt from bankruptcy. That doesn’t necessarily mean that you’ll lose the vehicle, however. Again, your options will depend on the bankruptcy chapter you file.

    • Chapter 7 bankruptcy. Suppose that you have $10,000 in equity in your car, but your state’s vehicle exemption is $5,000. Typically, the bankruptcy trustee appointed to administer the case would sell the car, pay off any loan, and distribute the remaining funds to creditors. Keep in mind that if you want to keep the car, most trustees will let you pay for the nonexempt equity at a discount over a few months’ time. Filers often borrow the money from a friend or relative or use post-bankruptcy income to make the payments.
    • Chapter 13 bankruptcy. You don’t have to give up property in a Chapter 13 case. Howeverjust as in a Chapter 7 caseyou must pay your creditors an amount equal to the nonexempt vehicle equity. Therefore, if you want to keep a car that has more equity than you can protect, you’ll pay for the nonexempt equity in your three- to five-year repayment plan.

    Find Out What Happens To Your Car The Equity In Your Car And Car Loans In Bankruptcy

    How to keep your car in Chapter 7 bankruptcy

    One of the benefits of bankruptcy is that you can get out from under an oppressive car loan or lease. And, unless you have an expensive luxury car that you own outright or a valuable antique, it’s not likely that you need to worry about losing the car in bankruptcybut that’s not always the case.

    Your particular options will depend on whether you file a Chapter 7 or Chapter 13 bankruptcy. Keep in mind that under either chapter, you’ll have to pay the car loan if you want to keep the vehicle. But in some instances, you might be able to pay something less than what you owe.

    Recommended Reading: Usaa Auto Refinance Phone Number

    Redeeming The Cars Current Replacement Value

    There is a way to keep your car when you file for Chapter 7 bankruptcy even if its worth more than the exemption limit. You can pay the difference the remaining current replacement value to the lender, and own the car outright. This is called redeeming. Most people filing for bankruptcy, though, dont have the bundle of cash needed to do that. Fewer than 2% go this route.

    What Happens To My Car During Bankruptcy

    Filing for bankruptcy is a serious decision that can damage your credit for seven or 10 years, depending on the type of bankruptcy. But if you’re drowning in debt you can’t pay, it can serve as a last resort to help you hit “reset” on your finances.

    There are two main types of bankruptcy: Chapter 7, which liquidates some of your assets, and Chapter 13, which focuses on repaying debts. What happens to your car in bankruptcy depends both on the type of bankruptcy you file and how much equity you have in your vehicle.

    Recommended Reading: Specialized Loan Servicing Payoff Request Form

    Reaffirming The Car In Bankruptcy

    Most motor vehicle creditors will require an individual to sign a Reaffirmation Agreement on the vehicle to be filed with the court. Signing this document essentially puts you in the same position with your obligation as before you filed. Reaffirming on a motor vehicle is also a useful tool to begin the process of rebuilding your credit. You can also choose to redeem the car by paying the lender the current market value in one payment.

    Chapter 7 Bankruptcy When You Are Still Making Payments On A Car

    Can I keep my car if I file bankruptcy

    Chapter 7 bankruptcy will wipe out most unsecured debt.

    It can also wipe out secured debt, which is a debt which has collateral attached.

    A car loan is an example of a secured debt.

    When you buy a car, you borrow money, and the bank that lent you the money files a lien on the title to the vehicle. The car loan is then secured by the car: you cannot sell the car without paying the loan so that lenders lien is lifted. If you fail to make the car payments, that lien on the carthe collateralallows the lender to repossess the car.

    When you file for Chapter 7 bankruptcy, if you are making payments on a secured car loan, do you get to keep the car?

    In a Chapter 7 bankruptcy, you do have the option to surrender your car.

    When you surrender a vehicle in Chapter 7, the lender takes possession of the vehicle that is collateral for the secured loanbut your contractual personal obligation to continue making installment payments is discharged. It is wiped away in the Chapter 7 process, just like any unsecured debt would be.

    You do not, however, get to keep the car for free.

    However, if you do not wish to surrender the vehicle, typically, in the Chapter 7 process, you will be asked whether or not you wish to reaffirm the car loan.

    Reaffirmation means that, during the Chapter 7 process, you enter into an agreement with the vehicle loan lender that the car loan survives the Chapter 7 bankruptcy and is not discharged.

    Also Check: How Much Can I Qualify For A Car Loan

    A Car Loan Means You Keep Your Vehicle

    You might naturally assume that if you have a car loan debt and then file for bankruptcy, your vehicle will be on the line.

    However, the opposite is true.

    This is because most car loans come as secured contracts.

    That is, the cost of the loan is secured against the value of the car.

    Something that means it wont be covered by the bankruptcy agreement, and therefore as long as you keep up your payments, you are in no danger of losing your car.

    However, you can take action to have the debt on your vehicle covered by your bankruptcy agreement if you choose to.

    Something that may be appropriate if you are concerned that you wont be able to pay it off.

    The way to do this is to sell the vehicle to pay off the loan.

    Then if you had any additional debt left on the loan, it would become unsecured and so able to be covered by your bankruptcy agreement.

    Although to do this, you would need the go-ahead from your car loan lender.

    Everything would need to be done and dusted before you declare yourself bankrupt as well.

    What Happens To Your Car In Chapter 7 Bankruptcy

    Filing for Chapter 7 bankruptcy can clear some unsecured debts, but it may also require selling or giving up some assets to pay debts. The items that are exempt from liquidation, and the value that can be exempted, varies by state.

    If you file for Chapter 7 bankruptcy and local bankruptcy laws allow you to exempt all of the equity you have in your car, you can keep the vehicleas long as you’re current on your loan payments. And if the market value of a vehicle you own outright is less than the exemption amount, you’re in the clear.

    To determine how much equity you have in the vehicle, subtract your current loan balance from the car’s value. Because vehicles tend to depreciate in value fairly quickly, you may not have much equity unless you’re nearing the end of your loan term.

    Once you’ve determined how much equity you have in your vehicle, take a look at what the motor vehicle exemption is in your state. If you have less equity than the exemption limit, the car is protected. For example, if your state’s exemption limit is $4,000 and you have $3,500 in equity in your vehicle, you can keep it.

    If the equity in your car exceeds the exemption limit, a few different things can happen.

    Don’t Miss: Refinance Conventional Loan

    Keeping A Vehicle You Own During Bankruptcy

    If you no longer owe money on an auto loan, you have different options when it comes to keeping your car. Before you file your Chapter 7 bankruptcy, it’s very important to know the estimated value of your vehicle. You’re going to be asked how much your car is worth when you file your initial paperwork so that the lender can assess the value of your property.

    If you don’t know the current estimated value of your vehicle, you can use a site such as Kelley Blue Book or NADAguides to get an approximate value. If you need to keep your car, you have to ensure you can exempt the value of your vehicle. Otherwise, your bankruptcy trustee could sell your car in order to repay some of your debt.

    If you’re unable to hold on to a vehicle that you need during a Chapter 7 bankruptcy, you may need to get into another car quickly. This can be difficult during bankruptcy, especially a Chapter 7 because it’s so short. Many lenders refuse loan applications from lenders during bankruptcy because they don’t want to chance a loss if the vehicle gets included in your bankruptcy filing.

    However, there are bankruptcy auto lenders that can help if you find yourself in need of another car during Chapter 7 bankruptcy and we know where to find them.

    Returning The Vehicle Bankruptcy To Get Out Of A Car Loan

    What happens to my car loan in a chapter 7 bankruptcy, can I keep it and reaffirm?

    Sometimes the best option is returning a vehicle with a car loan to the lender. Then you’ll be out from under the car loan entirely. Many bankruptcy filers will return a fianced car to the lender when they:

    • paid too much for the vehicle
    • can’t afford the monthly payment, or
    • don’t want the vehicle or the car loan associated with it.

    If you’re in this situation, you’ll check the box that states that you plan to “surrender the property” when you’re filling out the Statement of Intention for Individuals Filing Under Chapter 7form. You can also surrender a car with a car loan in Chapter 13 bankruptcy.

    You May Like: Auto Loans Usaa

    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.

    More articles

    Popular Articles