If you’re behind on secured payments when you file for Chapter 7 bankruptcy, a creditor can ask the court to lift the automatic stay (the order preventing creditors from collecting against you) and allow the bank to proceed with foreclosure. Also, you must indicate to the court whether you intend to reaffirm the debt, redeem the car, or surrender the car (more below). In many cases, our clients retain their cars for weeks if not months after filing bankruptcy. For the vast majority of individuals, owning a car is an absolute necessity, so it's no surprise that one of the foremost thoughts in the minds of many people that intend to file for bankruptcy is whether they can keep their cars. Privacy Policy || Site Map. Missouri allows individuals to exempt up to $3,000 of equity in a motor vehicle as long as your name is on the title of a vehicle. Will I be able to keep my car if I file a Chapter 13 Bankruptcy? So how long can the debtor keep her car after filing chapter 7 bankruptcy if she doesn’t want to keep paying for it and can’t afford to pay the creditor the car’s value in a lump sum? Fortunately, you may be able to keep your car if you file for Chapter 7 bankruptcy. Keeping Your Car. People often wonder how Chapter 7 bankruptcy will affect their ability to keep their car. As with a house, you can keep your car in Chapter 7 bankruptcy if you’re current with your loan payments (or the car is paid off), and your state’s laws allow you to exempt your equity in the vehicle. However, filing for Chapter 13 bankruptcy might be a better option for you if you are facing foreclosure or have significant equity in your home. Especially if you have a terrible interest rate on the car—and if you can put your hands on a junker—give them the car back. The option you choose determines whether you can keep using the car and whether you will be liable for lease payments, excess mileage, or other penalties after the bankruptcy. In Chapter 7 bankruptcy there are some rules. Your Car in Chapter 13 Bankruptcy: An Overview, redeeming property in Chapter 7 bankruptcy, take a percentage as a fee for selling the car, and. If you’re tight on money, you may not be able to afford this, making you … Once you sign a reaffirmation agreement and it’s approved by the bankruptcy court, you know for sure that you can keep the property after your Chapter 7 bankruptcy is cover. Yes, you can keep you car in chapter 7 bankruptcy. There are a number of strategies you can use to keep your vehicle when filing for Chapter 7 bankruptcy. Whether or not you will lose your home depends on many factors such as if you are current on your mortgage. Debt Problems? These include the following: Bankruptcy exemptions – the state of North Carolina allows you to exempt up to $3,500 in equity on your car, truck, or other type of vehicle. This will allow you to keep your automobile under similar terms to your original agreement although you may be able to negotiate better terms. In Chapter 7 bankruptcy, whether you keep your car depends on the car loan amount (if any) and any available exemptions you can apply to that loan. © 2020 Baker & Associates. If you want to keep your car, you have to take some action to keep the lender from getting your car. For a Chapter 7 case, the filing fee recently was raised to $335. Credit Card Debt? Proudly Serving Greater Houston, Bryan/College Station, and The Rio Grande Valley. Here are some other options you’ll have in Chapter 7: Find more about what happens to cars in bankruptcy in Chapter 7 Bankruptcy and Your Car. You will need to know whether the lender considers your car loan in default before you convert to a Chapter 7. The attorney listings on this site are paid attorney advertising. These include the following: Bankruptcy exemptions – the state of North Carolina allows you to exempt up to $3,500 in equity on your car, truck, or other type of vehicle. Reese Baker is Board Certified by the Texas Board of Legal Specialization in Business Bankruptcy and by the American Board of Certification in Consumer Bankruptcy. If you are caught up on your car payments, one way to ensure you keep your car in Chapter 7 bankruptcy is to either pay a lump sum to purchase the car at its current value or enter into a reaffirmation agreement, which is essentially a new contract. 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. Your Car in Chapter 7 Bankruptcy. Attorney Reese Baker is responsible for the content of the advertisement. Because this requires a lump-sum payment, however, it's often not feasible for people considering bankruptcy. Here's a closer look at the options to keep your car. You can only do this if the car is exempt or the trustee has "abandoned" the property (decided not to sell it). When you own a car and file for Chapter 7 bankruptcy, what happens to your car will depend on whether or not you owe money on the vehicle. Keep in mind that the bank would much rather settle the amount and get a lump sum payment versus repossessing the vehicle so don’t be afraid to ask for a better deal. To learn more about these options, see Your Car in Chapter 7 Bankruptcy. Your Car in Chapter 7 Bankruptcy As with a house, you can keep your car in Chapter 7 bankruptcy if you’re current with your loan payments (or the car is paid off), and your state’s laws allow you to exempt your equity in the vehicle. Many times, individuals rely on their automobile to get them to work and take care of basic necessities such as grocery shopping and doctor visits. A car can be redeemed in Chapter 7 whether or not the payments are current. If you plan on filing for bankruptcy, you’ll be able to keep your home if you can meet the requirements of the bankruptcy chapter that you choose. If you make all plan payments, not only will you receive a bankruptcy discharge but also a free and clear title to the car. There are pros and cons to reaffirmation agreements, so make sure you discuss this with your Houston bankruptcy attorney before signing a new agreement with your automobile loan provider. People with lots of equity in their houses lose a portion of the tax refund for one year. If the equity value is worth more than you can protect, the bankruptcy trustee assigned to your case will likely sell it and distribute the nonexempt proceeds to your creditors. Not surprising, the vast majority of our readers (87%) who filed under Chapter 7 were able to keep their cars. In chapter 7 bankruptcy, a personal auto exemption will protect up to $5,000 of equity in your car or cars ($10,000 if you are 60+ years of age or disabled) from the bankruptcy trustee. If you own your automobile and its value is below your bankruptcy exemption amount, you are at no risk of losing your vehicle and will be able to keep it when filing for Chapter 7 protection. If you are still making monthly payments on the car however, it could be a different story. If you own a car worth $5,000 and your state allows a $6,000 car exemption, then you can keep your vehicle. Not surprising, the vast majority of our readers (87%) who filed under Chapter 7 were able to keep their cars. Because filing for bankruptcy doesn’t get rid of the lender’s lien, if you want to keep the car, you’ll have to continue making payments or pay for the car another way. Must the car be surrendered immediately? Therefore, if you want to keep that car, you will have to continue making payments or at least pay the creditor the value of the car. When dealing with a Chapter 7 bankruptcy and your car, it comes down to whether or not you’re behind on your payments. Most people use post-filing earnings or get a gift or loan from a friend or relative. In Chapter 7 bankruptcy, most or all of your debts are discharged. First determine how much your vehicle is worth. There is a motor vehicle exemption that may help protect your vehicle including any equity it may have. You have a few options to pursue if you want to keep your car in a Chapter 7 bankruptcy, but you have to act fast or it can be used to pay back your creditors before your remaining debt is wiped away. from your creditors and to keep that property. For instance, you file for Chapter 7 due to combined debts you cannot pay. This option could be a game changer because it saves you money in the long run. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. In another state with lower exemptions, the Chapter 7 trustee might be able to sell your car, pay you the exempt amount, and keep the rest to pay your creditors. In that case, the trustee will “abandon” it. The answer is no. Copyright © 2020 MH Sub I, LLC dba Nolo ® Self-help services may not be permitted in all states. Most people can keep their car and get debt relief by filing bankruptcy. Not only can retaining a bankruptcy lawyer help you get your bankruptcy petition approved, but they can also help you keep your vehicle while avoiding the need to attend reaffirmation hearings. First, you likely pledged the car as collateral when you took out the loan, making the loan a secured debt. In Minnesota, people without a lot of equity in a house, and renters, get to keep their tax refunds. If substantial nonexempt equity exists, however, here’s what the trustee will do: Some trustees will allow you to pay the trustee for the nonexempt equity and keep the car. If you want to hold on to your car after Chapter 7, you'll have to sign a reaffirmation agreement. 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. There are two primary ways to keep your car after filing for Chapter 7 bankruptcy if you are still in the process of paying it off: Reaffirming the car debt: If you reaffirm your car debt, you agree with the party that you are making payments to and promise not to discharge the debt during the Chapter 7 filing. You can catch up on missed mortgage payments in this chapter. In many cases, a bankruptcy filer can choose to either keep the vehicle or surrender it to the lender. It is a common misconception that you have to give up everything valuable during chapter 7 bankruptcy. Your bankruptcy lawyer can also approve the reaffirmation agreement for you as long as the new payment doesn’t create a hardship for you, and thus will allow you to avoid attending a reaffirmation hearing. Under Chapter 7, you can keep assets, including your house and car, if the asset is exempt under federal or state law. When you agree to make one lump sum payment to the trustee for the value of the car, this is known as redemption, and can be an effective strategy for minimizing your debt using bankruptcy. Therefore, if you want to keep your car, either you must enter into a reaffirmation agreement with the lender, or you must redeem the car by paying the lender, in one lump sum, the full outstanding balance owed on the car. If you are filing for bankruptcy under Chapter 7, you may be able to keep your car by using the exemption for it. The following options are available when you file Chapter 7 bankruptcy: If you own a car, you can keep it under either the Tennessee or federal bankruptcy exemptions as long as it does not exceed a certain value. On the one hand, you want to keep your car and receive the benefit of post-bankruptcy credit reporting of future payments. It’s possible to keep your car loan during a Chapter 7 bankruptcy, but it may not be a wise idea, depending on how much you owe. For instance, if you owe $15,000 on a car that’s only worth $5,000 at auction and surrender that car in chapter 7 bankruptcy, you will not be liable for the remaining $10,000. If you’re concerned about filing for bankruptcy and you have a house or a car that you want to keep, please come in and speak with me, an experienced bankruptcy attorney. While you can keep your home, car or truck, and retirement accounts, some other things become part of the bankruptcy estate under Chapter 7 filing rules. 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