Are you considering filing for bankruptcy but worried about losing your car or truck? Don’t worry – in most cases, it’s possible to keep your vehicle when you file for bankruptcy. Here’s what you need to know:
Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, also known as “liquidation” bankruptcy, you may be able to keep your vehicle if you have equity in it that is protected by an exemption. Each state has its own set of exemptions that allow you to protect certain assets, including vehicles. If the equity in your vehicle is fully exempt, you can keep it. If it’s not fully exempt, you may be able to keep it by reaffirming the debt or redeeming the vehicle.
Reaffirming the Debt
When you reaffirm the debt, you agree to continue making payments on your car loan as if you never filed for bankruptcy. This means that you’ll be able to keep your vehicle as long as you stay current on your payments. However, you’ll still be responsible for the debt even if your other debts are discharged in bankruptcy.
Redeeming the Vehicle
When you redeem the vehicle, you pay the creditor the current value of the vehicle instead of the full amount of the loan. This can be a good option if your vehicle is worth less than the amount you owe on it. You’ll need to have the funds to redeem the vehicle upfront, but you won’t have to continue making payments on the loan.
Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, you can usually keep your vehicle even if you have equity in it. This is because Chapter 13 bankruptcy involves a repayment plan rather than liquidation. You’ll need to include your car loan in your repayment plan, but you may be able to reduce your payments or interest rate. As long as you make your payments on time, you should be able to keep your vehicle.
Keep in mind that if you’re behind on your car loan payments when you file for bankruptcy, you’ll need to catch up on those payments to keep your vehicle. If you can’t catch up, your lender may be able to repossess your vehicle even if you’re in bankruptcy.
In conclusion, keeping your vehicle in bankruptcy is usually possible as long as you have equity in the vehicle that is protected by an exemption or you include the car loan in your Chapter 13 repayment plan. If you’re considering bankruptcy, it’s important to speak with an experienced bankruptcy attorney to determine the best course of action for your specific situation.
If you are considering bankruptcy, it’s important to speak with a bankruptcy attorney to determine the best course of action. Karra Kingston is a bankruptcy lawyer in New York and New Jersey and she helps people get a fresh start. 