If you’re unable to afford the filing fee, you can petition the court to have it waived or to pay it in installments. 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. Missouri allows individuals to exempt up to $3,000 of equity in a motor vehicle as long as your name is on the title of a vehicle. Proudly Serving Greater Houston, Bryan/College Station, and The Rio Grande Valley. Furthermore, a seasoned bankruptcy expert will have the experience to guide you through the process while allowing you to keep the maximum amount of what you own and discharge the most amount of debt. Many times, individuals rely on their automobile to get them to work and take care of basic necessities such as grocery shopping and doctor visits. Whether or not you will lose your home depends on many factors such as if you are current on your mortgage. Reese Baker is Board Certified by the Texas Board of Legal Specialization in Business Bankruptcy and by the American Board of Certification in Consumer Bankruptcy. 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. For example, say your car is worth $3,500, and the exemption for motor vehicles in your area is up to $6,000. Not surprising, the vast majority of our readers (87%) who filed under Chapter 7 were able to keep their cars. In understanding how much protection you qualify for includes reviewing the amount of equity you have in your vehicle. Your ability to do so will depend on: ... Also, some trustees will let you pay to keep your car. 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. In that case, the trustee will “abandon” it. You’ll need to be current on your payment and able to protect all of the home equity with a bankruptcy exemption. © 2020 Baker & Associates. 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. There are a number of strategies you can use to keep your vehicle when filing for Chapter 7 bankruptcy. 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. If you want to keep your car, you have to take some action to keep the lender from getting your car. Chapter 7. It's important to note that the vehicle owner only has to pay the amount of the car's current value. 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. 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. 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. While you can keep your house in chapter 7 bankruptcy in most cases, it is possible that you may lose your home. When you file Chapter 7 , you have at least three choices in how you deal with your car loan: Attorney Reese Baker is responsible for the content of the advertisement. 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. Here are some other options you’ll have in Chapter 7: Find more about what happens to cars in bankruptcy in Chapter 7 Bankruptcy and Your Car. 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. Therefore, if you owe more than the car is actual worth according to fair market value, you effectively discharge the difference. For instance, the trustee might agree to give you a few months to pay for the equity minus sales costs. Redeeming a Car in Chapter 7 Bankruptcy. Under Chapter 7, you can keep assets, including your house and car, if the asset is exempt under federal or state law. Most people can keep their car and get debt relief by filing bankruptcy. 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. Common exemptions include homes, vehicles, personal property, household goods and appliances, but state laws vary. 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. In addition to continuing your regular car payments, your lender may require you to “reaffirm” your car loan in order to keep the car. distribute the remaining funds to your creditors. Option 2- Redemption . For instance, you file for Chapter 7 due to combined debts you cannot pay. This gives you time to decide which course of action to take with your car. A car can be redeemed in Chapter 7 whether or not the payments are current. 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. Keeping Your Car during Bankruptcy. (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.). 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. Fortunately, you may be able to keep your car if you file for Chapter 7 bankruptcy. 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. Once you and the lender come to terms, you must file this with the bankruptcy court and get it approved by a bankruptcy judge. If you are no longer making payments on a car, and it has no equity beyond the exemption, you can protect it entirely. 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 considering Chapter 7 bankruptcy, most people want to know if they can keep their property. 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. On the one hand, you want to keep your car and receive the benefit of post-bankruptcy credit reporting of future payments. Your use of this website constitutes acceptance of the Terms of Use, Supplemental Terms, Privacy Policy and Cookie Policy. 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. Luckily, you’ve got a few options. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Debt Problems? 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 your car is paid off, you can generally use a bankruptcy “exemption” to protect both your car and the equity in your car. Yes, you can keep you car in chapter 7 bankruptcy. The key to redemption, assuming you have enough to make the payment, is that you pay the total amount of the value of the car despite the loan balance you owe. You’ll have to use funds that aren’t part of the bankruptcy. A car is an essential asset when it comes to getting to and from work, […] If you own a car worth $5,000 and your state allows a $6,000 car exemption, then you can keep your vehicle. 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. In Chapter 7 bankruptcy you can "redeem" a car by paying the lender the current replacement value of the car. When dealing with a Chapter 7 bankruptcy and your car, it comes down to whether or not you’re behind on your payments. 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. Not surprising, the vast majority of our readers (87%) who filed under Chapter 7 were able to keep their cars. In Chapter 7 bankruptcy there are some rules. The Motor Vehicle Exemption in Bankruptcy. 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. Chapter 7 Bankruptcy. Also, you must indicate to the court whether you intend to reaffirm the debt, redeem the car, or surrender the car (more below). 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. 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. If you don’t pay the loan as agreed, the lender’s security interest, or lien, allows the lender to repossess the vehicle. 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. It is a common misconception that you have to give up everything valuable during chapter 7 bankruptcy. 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. 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. 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. There is a motor vehicle exemption that may help protect your vehicle including any equity it may have. 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