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  • Bankruptcy Law

Can you keep your car if you file for bankruptcy?

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βˆ™ 2013-09-12 04:37:31

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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.

2013-09-12 04:37:31
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