Can you finance a new car then file bankruptcy and still keep the vehicle?

Answer 1

Probably. I don't know your state of residency or whether you would be filing Federal or state BK. Some states only allow one or the other, some let you combine them. In a Federal filing the vehicle exemption is $2,775. If it is your only car, that amount is subject to appeal. Your state of residency vehicle exemption is probably a different amount. If you want to email me with your state, I could let you know what it would be.

Answer 2

Yes, how the bankruptcy will affect the ownership of the vehicle depends on the state vehicle exemption amount and if the lender will agree to reaffirm the loan. If there is no loan/lien pertaining to the vehicle then only the state exemption will apply.

Answer 3

Under the Bankruptcy Reform Act, lawyers are no longer allowed to advise you to incur additional debt before filing a bankruptcy, and this would probably include getting a new car. However, if your car is breaking down and you need a new one and then subsequently file bankruptcy, there is no provision of the law that says you're not allowed to keep it if you keep paying for it and reaffirm the debt. Ask your lawyer for more info - or don't because he or she can't answer!

Answer 4

What Chapter Are We Up To?

There are two types of bankruptcy. In Chapter 13, you propose a repayment that allows you to repay your debt over time. If the court approves your Chapter 13 plan and you keep making the car payments, then you can keep the car.

In a Chapter 7 case, your ability to keep your car depends on several factors. Filing for Chapter 7 creates a bankruptcy estate, and state law determines what assets you get to keep when you file bankruptcy. Equity in at least one car can often be protected, but you need to review the laws of your state.

If you own the car outright, the value will determine if it can be protected. In California for example, you can protect about $2800 of the value of your vehicle. If you own a car free and clear that is worth $10,000, the chapter 7 trustee might decide to sell it and give you the $2800. Even if your equity exceeds the value of exemption, the trustee could also decide there is not enough equity in the vehicle to be worth selling.

If you owe money on the vehicle and wish to keep it, you have two choices: (1) reaffirmation or (2) redemption. Reaffirmation is an agreement with the lender to keep making payments, and you agree not to receive a discharge of the debt for the car. Redemption is when you purchase the car outright for what you owe on it, which is difficult to do if you don't have the cash or someone willing to lend it to you.

The bottom line is that you need to consult a local bankruptcy attorney who knows your state's exemption laws.

Usually no, Bankrupts rarely lose their cars because they've gone bankrupt. Of course this is conditional. Talk to your bankruptcy advisors or attorneys.

Answer 5

The law actually limits it to 1 car of $500 or less...however, virtually all Judges (realizing that old amount gets a car with more troubles than solutions) simply make it a reasonable car....you know - 3 year old Toyota OK, New Mercedes..not gonna be.

If the vehicle is really a work one...like a truck for a mover...it is almost always exempted no matter what.

The above is wrong. First, it's not the value of the car, it's the debtor's equity, if the debtor has a $80,000 car with a $90,000 loan, he gets to keep it because it's not an asset, it's a debt. (whether it's a good idea to keep it is another issue). Second, the exemption is different in each state, for example in Ohio you get a auto exemption of $3,225. Work vehicles are NOT almost always exempted - there is a separate "tools of trade" exemption but it's not enough to cover a truck (Ohio $2,025).

Answer 6

If the value of the car is the same or below your state's car exemption, they you can keep the car. If the value is above, the BK Trustee can seize and sell the car, or you can pay the Trustee the difference between the car value and exemption amount. (in some cases, even if the car value is higher than the exemption amount, you might be able to keep it because some states have a "wildcard" exemption or allow you to transfer unused exemptions from different categories of property, although this is state specific)

Answer 7

In the event of chapter 7 bankruptcy, you may retain possession of secured property only in the event you reaffirm with the lender. In the event no reaffirmation is signed for each piece of property, the property that has not been reaffirmed must be returned to the lender. If non-reaffirmed property is not returned to the lien holder (lender), that party may seek or continue with repossession of that property and any unpaid balance that is not forgiven by the chapter 7 once the bankruptcy is dismissed or discharged and the stay is lifted.

Answer 8

By filing a chapter 13 BK, although its possible to go through a chapter 7 while keeping the mortgage current.

Answer 9

yes