When people file for bankruptcy, one of their primary concerns is typically their car. If you have spent your money on a vehicle which has become a prized possession for you, chances are that you don't want to risk losing that mode of transportation in a bankruptcy. In some circumstances, you may be able to keep your car, especially if you need it to get to and from work on a regular basis.
You can list your vehicle as your primary mode of transportation, and the court may make in an exemption from liquidation when you file. There are two types of bankruptcy that you can typically choose from, a Chapter 7 and a Chapter 13. In both cases, you may be able to keep ahold of your vehicle after you file. If you are behind on car payments, the automatic stay that is invoked in bankruptcy can keep any auto dealers from repossessing your car. Most of the time the automatic stay goes into effect right after you file for bankruptcy.
If you file a Chapter 7, then you may be able to use an exemption to keep your car from a forced sale. If you file a Chapter 13 bankruptcy, then you may also be allowed to repay your car loan at a more affordable rate, this way you won't lose it to collectors. You will want to discuss your concerns regarding your vehicle with a bankruptcy attorney and ask him or her about your specific situation.
In a chapter 7 bankruptcy, you can eliminate all unsecured debts but you may still have to pay for a secured debt such as a car. If you own your car outright, then chances are that it is fully protected from repossession because you don't have any debts to pay on it. This is applicable to cars that have been paid off or cars that you may have paid for in cash. In this situation, your car is a Chapter 7 exemption and cannot be taken from you. You will want to make sure that you have a clear title to your car, or things may get a little more complicated.
For example, you may need to reaffirm with your car creditor when you file for bankruptcy in order to keep a hold on your vehicle. You can do this with a reaffirmation agreement. This is an agreement which occurs between you and the car creditor in which you will agree to pay the balance on your car note despite the fact that a bankruptcy is in place. If you do this, then the car company will not be allowed to repossess or take back the property.
Because the debt was reaffirmed, it will not be discharged, and will survive the bankruptcy. This means that you will need to pay the loans, and if you do not then the creditor is within his or her full right to repossess your car after the bankruptcy is completed. The decision to reaffirm a loan on a car is a serious financial matter, and you will want to be cautious to make sure that the reaffirmation is in your best interests.
As well, in a chapter 7 bankruptcy you have the option to redeem your car from the creditor. This happens when you make a lump sum payment that is equal to the car's fair market value. Essentially, this means that the balance of the debt will be discharged and you will be able to keep the car. This can be especially helpful if your car has deteriorated in value and you owe more on the vehicle than it is actually worth.
If neither of these options seems appealing to you, then you may have to surrender your vehicle. This happens when you determine that you owe more on the car than it is worth, and therefore decide to unload the car and the debt in your Chapter 7 bankruptcy by surrendering the vehicle to the creditor.
This will cancel the debt that you owe on the car. If you are leasing a car, then you have the options to continue making monthly lease payments or the option to surrender the car back to the creditor. You cannot discharge your lease payments because they are ongoing. It is always best to hire a bankruptcy attorney to help you in your case, so talk to a local attorney today to get the best assistance as you file and work through the debt discharges and exemptions regarding your vehicle.