Keeping Your Motor Vehicle after Filing for Bankruptcy
Provided by HG.org
When filing bankruptcy, it is likely that most assets may be removed to pay for debts depending on the chapter filed, and for those with few means of travel, it is essential to keep that vehicle after the process has completed. It is important to know what is needed when car payments are behind, and bankruptcy has started.
Most individuals file a Chapter 7 bankruptcy procedure when they do not make over a certain amount of disposable income. However, those that make enough that some debts may be paid file a Chapter 13. This will determine if the entire amount of loans is removed from the need to pay or if the individual will still owe on loans acquired before the bankruptcy is completed. Then, if the applicant has an auto loan and is still paying on the vehicle, he or she may get to keep the car based on factors of the state, situation and type of chapter filed.
The Chapter 7 bankruptcy permits someone to file bankruptcy and remove most or all the debts accrued that the individual still owes. However, nonexempt property must be given up. The bankruptcy trustee is used to sell the property and then pay unsecured financial lenders for items that are still needing payment. To keep the vehicle, the equity must be exempt, and the owner must not be behind in payments to the auto company. These two requirements must be satisfied before it is possible to retain the automobile. If possible, the applicant should ensure his or her payments are up to date before filing bankruptcy.
Exemption of the Vehicle
Most states permit a type of vehicle to remain with the owner in a bankruptcy procedure. However, the amount will vary greatly depending on certain factors and the state where the process has been initiated. The dollar amount may be as low as a few hundred to several thousand and could exceed this when other aspects exist such as disabled driver outfitting. These elements will determine if the exempt status holds for the specific vehicle of the applicant, and then he or she may progress through the secure in the knowledge that he or she may retain the car.
Selling the vehicle may occur when the equity possessed, or the market value after the loan has been subtracted, is much more than the provided exemption amount in the states. The applicant may be provided the exempt portion, or the vehicle may be used to pay unsecured debts. In certain situations, it is possible to use another exemption to make up these differences and keep the automobile. If assets exist that may take the place of the car, the trustee may accept these in place. Then, the applicant is able to keep his or her mode of transportation after the bankruptcy has completed.
Keeping or Losing the Vehicle
For any possibility of keeping the car to exist, the applicant must be honest and ensure all information has been provided to the bankruptcy agency. Any attempt at deception could lead to a rejection of the application and termination of the procedure. Additionally, the person may face criminal charges as well as pay civil damage to the bankruptcy organization. It is crucial to also ensure that all payments are up to date. Any instances where the car payments are behind generally lead to a loss of any vehicle still being purchased by the applicant.
There are options available before starting bankruptcy Chapter 7, but it is imperative that the individual seek some type of payment arrangement that could prevent the loss. It is possible to redeem the property through a payment to the lending agency the entire replacement value of the vehicle in question. This does require a lumpsum payment, but it cannot be completed if the vehicle is not exempt or if the trustee has decided to sell. A new payment agreement is possible with the auto company through a reaffirmation of the debt. However, if no other options are available, it may be easier to file a Chapter 13 to keep the car. In this procedure, it is possible to keep property, but the applicant does pay back some of his or her debts in full and a repayment plan is initiated for others for a three to five year program.
Legal Support in Bankruptcy
To ensure that a vehicle is kept, it is important to contact a lawyer versed in bankruptcy procedures. He or she may protect the rights of the client and inform him or her of what to do.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.