can you keep your car in chapter 7

In many cases, our clients retain their cars for weeks if not months after filing bankruptcy. You’ll have to use funds that aren’t part of the bankruptcy. You don’t have to give up all of your property when you file for Chapter 7 bankruptcy. 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. If you want to keep your car, you have to take some action to keep the lender from getting your car. 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. If you elect to reaffirm the debt, and the lender agrees, you will be obligated to make the payments on your car just like you did prior to your Chapter 7. Not surprising, the vast majority of our readers (87%) who filed under Chapter 7 were able to keep their cars. In this case, you would be allowed to keep your vehicle. Under Chapter 7, you can keep assets, including your house and car, if the asset is exempt under federal or state law. You can catch up on missed mortgage payments in this chapter. If you can protect your car from the bankruptcy trustee, you must choose one of the options available in Chapter 7 for handling secured debt -- redemption, reaffirmation, or surrender. Similar to the above scenario, if you file Chapter 7 you can keep your car by meeting two conditions: Stay current on your car payments. In a Chapter 7, if the value of your car exceeds your exemption limit, it can be sold by your trustee to help repay your … Though your car can be impacted in other forms of bankruptcy, Chapter 7 is the one that stands the greatest chance of causing a noticeable change. You just reaffirm the agreement in a chapter seven and you basically get to keep your car making the payments, as you always have. As previously mentioned, a reaffirmation agreement is a new agreement made between a creditor and the debtor that waives discharge of a debt that would otherwise be dischargeable in a pending bankruptcy proceeding. Here's a closer look at the options to keep your car. And if the market value of a vehicle you own outright is less than the … On the other hand, if you lose your job or are unable to make the … Keeping Your Car during Bankruptcy. While you can keep your house in chapter 7 bankruptcy in most cases, it is possible that you may lose your home. If your car is financed you can always surrender your car in chapter 7 bankruptcy. If you own a car worth $5,000 and your state allows a $6,000 car exemption, then you can keep your vehicle. If you don’t pay the loan as agreed, the lender’s security interest, or lien, allows the lender to repossess the vehicle. If you can’t work out a deal with the lender, you’ll lose it to repossession. Fortunately, you may be able to keep your car if you file for 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. Keep reading to learn what a bankruptcy filing means for your car. Your best course of action will depend entirely on what works best for your situation. 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. Summary. Debt Problems? In many jurisdictions, in order to reaffirm a debt, you must demonstrate to the Bankruptcy Court that you will have the financial ability to make the future payments on that obligation. 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. (If you’re behind and want to pay the arrears in bankruptcy, read Your Car in Chapter 13 Bankruptcy: An Overview.). 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. If you make all plan payments, not only will you receive a bankruptcy discharge but also a free and clear title to the car. How to find out whether you can keep your car, home, or other assets in a California Chapter 7 bankruptcy case. However, if you live in a state that only allows a $2,000 car exemption (assuming no other exemptions are applicable), then the bankruptcy trustee may take your car and sell it. Whether or not you will lose your home depends on many factors such as if you are current on your mortgage. Most states provide a bankruptcy exemption of a certain amount for a vehicle. Under Chapter 7, you can keep assets, including your house and car, if the asset is exempt under federal or state law. If you are still making monthly payments on the car however, it could be a different story. When you redeem the car in the bankruptcy, you pay the lender either the outstanding balance or the value of the car, whichever is less. When you surrender your car in chapter 7 bankruptcy you are not liable for any deficiency you owe the lender. Can I Buy a House After a Chapter 7 or Chapter 13 Bankruptcy?How Long? 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 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. All Rights Reserved. If you can protect your car from the bankruptcy trustee, you must choose one of the options available in Chapter 7 for handling secured debt -- redemption, reaffirmation, or surrender. 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. Chapter 13. The attorney listings on this site are paid attorney advertising. Just like redemption in chapter 7 bankruptcy, if the value of the collateral is significantly less than the unpaid balance of the loan, the chapter 13 plan can provide for payment of the value of the car as part of your plan payments to the trustee. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Must the car be surrendered immediately? When you file a Chapter 7 bankruptcy you are allowed, by law, to protect a certain amount of personal property (furniture, clothing, jewelry, car, etc.) 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. The reason is that in a Chapter 13 bankruptcy, your debts are restructured into a payment plan, meaning you can continue paying these debts and thus continue to keep the underlying asset, in this case, a car. In some states, the information on this website may be considered a lawyer referral service. Most of the Chapter 7 bankruptcy exemptions have a limit. If you want to hold on to your car after Chapter 7, you'll have to sign a reaffirmation agreement. Chapter 7 bankruptcy allows you to keep or surrender your car or truck. Common exemptions include homes, vehicles, personal property, household goods and appliances, but state laws vary. In understanding how much protection you qualify for includes reviewing the amount of equity you have in your vehicle. In many cases, a bankruptcy filer can choose to either keep the vehicle or surrender it to the lender. This gives you time to decide which course of action to take with your car. First determine how much your vehicle is worth. 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. (To learn more about how car exemptions work, and to find the motor vehicle exemption amount in your state, see The Motor Vehicle Exemption in Bankruptcy.). If your car’s value exceeds the maximum exemption amount your car can be sold in chapter 7 bankruptcy; however, you will receive its exempt value in the form of a payment. Even though the car lender’s security interest in the vehicle is unaffected by your bankruptcy, a Chapter 7 discharge eliminates your personal liability on the loan. 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. When you file Chapter 7 , you have at least three choices in how you deal with your car loan: Exempt the equity in your vehicle as permitted by Missouri law. Even if your payments are up to date, creditors may still make you pay the remaining balance to keep the vehicle. 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. Talk to a Bankruptcy Lawyer. If you aren't making payments on a car, then you'll be able to keep it if its value falls under your state's vehicle exemption amount. 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. The short answer is maybe. If you have a, if you actually are like oh money on it, normally you get to keep the whole thing. If you are no longer making payments on a car, and it has no equity beyond the exemption, you can protect it entirely. In that case, the trustee will “abandon” it. Of course, if you need a fresh start but you need your car just as much, you probably wonder about how this works in Chapter 7 bankruptcy. In Chapter 7 bankruptcy, most or all of your debts are discharged. You have a few other considerations that you’ll have to make if you financed the vehicle and are still making payments. Your Car in Chapter 7 Bankruptcy. When considering Chapter 7 bankruptcy, most people want to know if they can keep their property. COVID-19 – Bankruptcy Court General Orders, Popular Restaurant Chains Filing For Bankruptcy, AMC Movie Chain Seeks Bankruptcy To Bounce Back, Houston Attorney Elected To Texas Bar Foundation. 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. Viewer question: What happens to my car in Chapter 7 bankruptcy? Learn more. Option 2- Redemption . For you, that may include a home or car. If you don't have a car loan, whether you can keep your car in Chapter 7 bankruptcy depends on your car's market value and the amount of any motor vehicle exemption available to you. An average attorney’s fee for Chapter 7 case can range between $900-$2,000 depending on the complexity of the case. If a consumer decides to keep a car that they're still paying on after filing a Chapter 7 Bankruptcy, they have a couple of options. In a Chapter 7 bankruptcy, if the equity in your vehicle meets or is below the exemption amount, you can keep your car one of two ways: Reaffirm your loan – When you reaffirm a loan in a Chapter 7 … In fact, you’ll probably be able to keep it even if there’s a small amount of nonexempt equity because the car won’t be worth selling. Each state decides the property its residents can keep (it will be listed in the state’s exemptions) and whether its residents can use the: If you can exempt all of the equity in your car, you’ll be able to keep it. It is a common misconception that you have to give up everything valuable during chapter 7 bankruptcy. A car can be redeemed in Chapter 7 whether or not the payments are current. When you file for bankruptcy, you can protect property that you’ll need to work and live by “exempting” it from your bankruptcy case. Must the car be surrendered immediately? 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. For instance, you file for Chapter 7 due to combined debts you cannot pay. If you’ve owned the car for greater than two and a half years and 910 days, and you’re, actually upside down on it. As you know, a Chapter 13 is called reorganization bankruptcy. from your creditors and to keep that property. First, you likely pledged the car as collateral when you took out the loan, making the loan a secured debt. 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. 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. When you file either a Chapter 7 straight bankruptcy or a Chapter 13 payment plan case, you'll be able to structure it so that you can keep your vehicle. Do Not Sell My Personal Information. To learn more about these options, see Your Car in Chapter 7 Bankruptcy. I’ll let you know exactly what filing a Chapter 7 bankruptcy would look like, and what filing a Chapter 13 bankruptcy would look like, and how that would affect your ability to keep your car or your house. When you file for Chapter 7, the following becomes true regarding your vehicle: You can potentially modify your loan agreement to reduce payments or improve terms – You may be able to negotiate for reduced payments based upon the car’s actual value. If you own a 2005 Honda Accord with no liens and a wholesale value of $5,200, a Chapter 7 trustee in a South Carolina case probably couldn’t sell your car, because you’d be entitled to claim $5,650 in equity in that car exempt. If you have a car when you file for Chapter 7 bankruptcy, you could find yourself with a big decision to make. Redeeming a Car in Chapter 7 Bankruptcy. Common exemptions include homes, vehicles, personal property, household goods and appliances, but state laws vary. But if you have unprotected equity, the trustee can sell your car, give you your exemption amount, and distribute the remaining amount among your creditors. A Chapter 7 bankruptcy is a short process, generally lasting only four to six months. How to keep your car in Chapter 7 bankruptcy is an extremely common question. This option could be a game changer because it saves you money in the long run. 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. 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? Let’s say you want to keep the car but it’s worth less than the amount due on the loan. If you are filing for bankruptcy under Chapter 7, you may be able to keep your car by using the exemption for it. Chapter 7. Keeping Your Car. In exchange, the bankruptcy trustee is allowed to sell your nonexempt property and use the proceeds to pay your unsecured creditors. For instance, the trustee might agree to give you a few months to pay for the equity minus sales costs. 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 only do this if the car is exempt or the trustee has "abandoned" the property (decided not to sell it). People with lots of equity in their houses lose a portion of the tax refund for one year. 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. For a Chapter 7 case, the filing fee recently was raised to $335. 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. With the redemption option, the lender is paid the current value of the vehicle in one lump sum. 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. If you’re filing for Chapter 7 bankruptcy, you may want to keep your car or your home. Will I be able to keep my car if I file a Chapter 13 Bankruptcy? If you elect to reaffirm the debt, and the lender agrees, you will be obligated to make the payments on your car just like you did prior to your Chapter 7. Credit Card Debt? How to Assume or Reject a Car Lease. 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. And, as a practical matter, you should be current on your payments when filing because Chapter 7 doesn’t have a mechanism that will help you catch up on missed payments. Usually, the price you’ll have to pay will be discounted by the amount the trustee saves in sales costs. If you own your car outright whether you keep your car depends on its value. Not surprising, the vast majority of our readers (87%) who filed under Chapter 7 were able to keep their cars. Chapter 7 bankruptcy wipes out many qualifying debts, but there is a catch—if you own too much property, the bankruptcy trustee can sell some of it and pay the proceeds to your … Massive debt and wage garnishments can cause it to be difficult to stay current on your automobile loan and so it’s not a surprise that individuals worry that by filing Chapter 7 bankruptcy, they will lose their car. 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. Bankruptcy? Debtors usually use the income earned after the bankruptcy or get a loan from friends or family. Privacy Policy || Site Map. There is a motor vehicle exemption that may help protect your vehicle including any equity it may have. 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. Copyright © 2020 MH Sub I, LLC dba Nolo ® Self-help services may not be permitted in all states. If you’re unable to afford the filing fee, you can petition the court to have it waived or to pay it in installments. distribute the remaining funds to your creditors. If you are behind on car payments, your car may be sold off. Keeping a car in Chapter 7 bankruptcy is a top priority for almost all filers. If you are behind in your car payments, you will lose your vehicle in Chapter 7 bankruptcy, despite having your equity exempt. You will need to know whether the lender considers your car loan in default before you convert to a Chapter 7. People often wonder how Chapter 7 bankruptcy will affect their ability to keep their car. To qualify for redemption, the car must be used for personal, family, or household use, and you must pay for the car in one lump sum payment. One choice is to give it back. Additionally, if you owe money on the car and would like to keep it, your loan will need to be current, and you’ll need to be able to continue making payments after the bankruptcy case. Luckily, you’ve got a few options. Therefore, if you owe more than the car is actual worth according to fair market value, you effectively discharge the difference. If you file for Chapter 7 bankruptcy and local bankruptcy laws allow you to exempt all of the equity you have in your car, you can keep the vehicle—as long as you're current on your loan payments. When you purchased your house or car, you “secured” the loan by agreeing to give the property back if you failed to keep your balance current. 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. A car is an essential asset when it comes to getting to and from work, […] When you file for Chapter 7 bankruptcy protection you’re looking to wipe out debts and keep as much of your property as possible. 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. 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? 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. If you are not current on your payments you lose some leverage since your lender doesn’t have to renegotiate, but the best way to keep the car is to get the lender to sign a reaffirmation agreement. When you file Chapter 7 bankruptcy, you are “in the drivers seat” with some choices on how to keep the car. Once you and the lender come to terms, you must file this with the bankruptcy court and get it approved by a bankruptcy judge. 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. 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. You can file a car redemption motion. Your use of this website constitutes acceptance of the Terms of Use, Supplemental Terms, Privacy Policy and Cookie Policy. In Chapter 7, you also have the option of purchasing your car outright from your lender at the retail value of the car at the time your bankruptcy is filed. © 2020 Baker & Associates. 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. On the one hand, you want to keep your car and receive the benefit of post-bankruptcy credit reporting of future payments. 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. Whether you can keep your car in Chapter 7 depends on whether you are behind on your car payments (unlike Chapter 13, Chapter 7 doesn't allow you to make up arrears through the bankruptcy), the amount of your car loan (if any), and any available exemptions you can apply to that loan. 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. 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. This will allow you to keep your automobile under similar terms to your original agreement although you may be able to negotiate better terms. You can only use it for debts for which you are up to date. Because this requires a lump-sum payment, however, it's often not feasible for people considering bankruptcy. Proudly Serving Greater Houston, Bryan/College Station, and The Rio Grande Valley. An experienced bankruptcy lawyer can advise you of the effect bankruptcy will have, and whether you … Many consumers may wonder if they can keep their vehicle in a Chapter 7 bankruptcy. 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. Most states provide a bankruptcy exemption of a certain amount for a vehicle. So if you’re behind on your car loan before you file for Chapter 7 bankruptcy, and you don’t have the money to redeem it, you’ll be able to keep your car only if your lender is willing to work with you. In addition to continuing your regular car payments, your lender may require you to “reaffirm” your car loan in order to keep the car. This means that anyone fiing bankruptcy can protect certain types of property up to a certain amount. A car can be redeemed in Chapter 7 whether or not the payments are current. Keeping Your Car in Chapter 7. And, as a practical matter, you should be current on your payments when filing because Chapter 7 doesn’t have a mechanism that will help you catch up on missed payments. For example, say your car is worth $3,500, and the exemption for motor vehicles in your area is up to $6,000. 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 owe money on a car, you can keep it by reaffirming the debt and continuing to make payments. If you are no longer making payments on a car, and it has no equity beyond the exemption, you can protect it entirely. This may be a good option if the value of your car is much lower than the amount of your loan. If you own a car, you’ll likely be able to protect (exempt) a particular amount of the vehicle’s equity (each state’s law varies). The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. When dealing with a Chapter 7 bankruptcy and your car, it comes down to whether or not you’re behind on your payments. In Chapter 7 bankruptcy there are some rules. Your ability to do so will depend on: ... Also, some trustees will let you pay to keep your car. 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. Being able to keep your car during a bankruptcy depends on whether or not the value of your vehicle meets the exemption you choose. Your payments are up to date, creditors may still make you pay the the. 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