The use of your vehicle is likely an incredibly important part of your life. It provides you with transportation to get to work and make a living. It is very likely that you rely heavily on your vehicle to complete your regular operations, whether you need it to run errands or get to work. It can be devastating and incredibly disruptive to your life when you suddenly lose your vehicle and have to scramble to find another way to get to work. Due to the importance of your vehicle in your life, it is important to understand how a bankruptcy will impact the possession of your vehicle. This will help you to make the best possible decision for your specific situation.
Whenever you have any questions regarding filing for bankruptcy, you should consult with a bankruptcy lawyer, like our professional team at LeBaron & Jensen. This will help to ensure that you have all of the information that you need when you consider the bankruptcy process. This consultation can also help you to understand what debts are dischargeable through bankruptcy, as well as who is eligible. This can also help you to understand the distribution of other assets. Bankruptcy can be an incredibly complex process, so it is important to ensure that you obtain the guidance of an experienced professional.
Various Bankruptcy Types
Ultimately, the ability to keep your vehicle will depend primarily on the type of bankruptcy that you file for. In general, individuals usually only file for either a chapter 7 or chapter 13 bankruptcy. Each bankruptcy has an array of considerations and will impact your life in different ways. Understanding the ins and outs of each bankruptcy type can ensure that you make the ideal decision for your specific situation. If you are unsure which bankruptcy will be best for you, it is crucial to consult with an expert. It tends to be easier to keep your vehicle in a chapter 13 bankruptcy than a chapter 7 bankruptcy, though there are still a few ways in which you may be able to keep your vehicle after filing for a chapter 7 bankruptcy.
Chapter 7 Bankruptcy
During a chapter 7 bankruptcy, most debts are discharged in exchange for the individual giving up their nonexempt property. The nonexempt property is sold by the bankruptcy trustee, and the funds are used in order to repay the debts that the filing individual has. Any remaining debt is typically discharged after the property has been sold. Due to the way a chapter 7 bankruptcy works, it may be necessary for the individual to surrender their car. However, this depends on the specific vehicle exemption laws present in the state.
Car Exemption Amount
Every state allows an exemption amount for certain kinds of property. This allows an individual to keep this certain type of property up to a certain monetary limit. The total amount will vary between states. It may be as little as $500 for a vehicle exemption or several thousand dollars for the vehicle exemption. Whether your car will count as an exempt possession will depend on its value in relation to the vehicle exemption amount in your state. If your vehicle is worth far more than the exempt amount, it is likely that you will be required to surrender your vehicle. In this situation, the car will be sold, and you will receive the exempt portion of the profits. The rest of the money from the sale will be distributed in order to repay other debts.
Current on Car Payments
During a chapter 7 bankruptcy, you will have to be current on car payments in order to keep your car as an exempt property. If you are behind on your car payments, it is very likely that you will lose the car. There are a few ways that you may be able to prevent this from happening. You will need to take care of the arrearage and ensure that your car payment is completely up to date. After this point, there are two possible options that may allow you to keep your vehicle. You may be able to “redeem the property” which essentially means paying the full value of the property in order to keep it. This will involve repaying all of the debt related to the vehicle, which is often difficult, especially for someone currently going through a bankruptcy.
The other option for keeping a car that you still owe money on with a chapter 7 bankruptcy is by “reaffirming the debt.” During this process, you will be required to sign for a new repayment plan with the seller. This can help to provide a new arrangement that will work for both parties. This is largely based on what will be agreeable to the seller. In most situations, the seller will want the full amount of the loan, so they will likely work with you regarding the reaffirmation of the debt.
Chapter 13 Bankruptcy
It is easier to keep your vehicle during a chapter 13 bankruptcy. This is due to the way that chapter 13 bankruptcies work. These bankruptcies allow you to keep your property and pay back your debts. Your debts are paid either in full or through a designated repayment plan. You must stay current on your car payments in order to keep your car throughout this process. Chapter 13 bankruptcies tend to be the least disruptive to your life, because they consolidate debts and allow you to keep your property.
It is incredibly important to ensure that you understand the impact that a bankruptcy will have on your life. It will result in a substantial impact on your credit and ability to obtain loans for several years following the bankruptcy. Consulting with a bankruptcy lawyer can help to ensure that you remain protected throughout the bankruptcy process and can obtain the best possible outcome. To learn more about obtaining the appropriate legal guidance to help with your bankruptcy process, contact our experts at LeBaron & Jensen today!