Can I keeP my car in bankruptcy?
US Bankruptcy law provides for several different ways to deal with cars in bankruptcy. How you deal with your car in bankruptcy depends on several factors, including which bankruptcy chapter you file under and whether you still owe money on the car.
In a chapter 7 bankruptcy, if you still owe money on the car, you can opt to “reaffirm” the loan. This allows you to continue paying the payments and to keep the car while receiving a discharge on other debts. If you are behind on the payments, you will need to make up the delinquent amount before you can reaffirm. If your car is paid off, you can apply the exemptions available under the bankruptcy code to protect your equity in the car up to a specific dollar amount. If the car is worth more than the exemptions protect, you will likely have to pay the difference to the bankruptcy trustee in order to keep the car.
Chapter 13 bankruptcy provides more options for dealing with cars. Of course, if your car is paid off, the exemptions protect your equity the same way that they do in a chapter 7 case. If your car is worth more than the exemptions protect, you will likely have to pay the difference into the chapter 13 payment plan. If you still owe money on the car, you can opt to continue paying the payment outside of the chapter 13 payment plan under the terms of the original loan. However, depending on when you bought the car, you may be able to keep the car while reducing the amount you owe and / or the interest you are paying on the loan. This option is particularly useful for people who find themselves in the all-too-common position of owing more on the car than the car is worth.
If you have questions about how your car or other property might be treated in bankruptcy, call Owings Law today.
Chapter 13 of the United States Bankruptcy Code allows for debt reorganization rather than the debt liquidation that occurs under a chapter 7 bankruptcy. Under chapter 13, a person is protected by the bankruptcy court while he or she repays all or part of the debt. That protection includes a ban on debt collectors taking any action against the debtor outside of the bankruptcy process. This ban is called the “automatic stay,” and it means that debt collectors are not allowed to call, send letters, or take any legal action directly against you once you file for bankruptcy.
For both forms of bankruptcy, there are exemptions that protect some of your property from being taken. For example, these exemptions protect the equity you have in your car and your home up to a specific dollar amount. They also protect your personal property, including firearms and jewelry, up to a specific dollar amount. There is even a “wildcard” exemption that you can apply to just about any property you choose.
Unlike a chapter 7 case, in which a debtor surrenders non-exempt property for liquidation, chapter 13 allows the debtor to retain some non-exempt property while making monthly payments on the debt. The chapter 13 payment a person makes on the debt depends on the person’s disposable income, which is how much the person has left over each month after paying living expenses. Chapter 13 generally allows for a fairly generous budget for living expenses, including an allowance for entertainment each month. This budget ensures that your life doesn’t stop when you file for bankruptcy.
If you have questions about chapter 13 or chapter 7 bankruptcy, contact Owings Law for a free bankruptcy consultation today. Our bankruptcy lawyers are here to answer your legal bankruptcy questions.
If you have ever asked the question: “What’s a chapter 7 bankruptcy” or “What’s a chapter 13 bankruptcy,” you are not alone. The short answer is that a Chapter 7 bankruptcy erases most kinds of debt, but you may have to turn over assets. You may also be barred from filing a Chapter 7 due to income. The bankruptcy lawyers at Owings Law can answer your legal bankruptcy questions and explain the differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy. Our bankruptcy attorneys offer free bankruptcy consultations, and we are happy to evaluate your situation to determine whether you should file bankruptcy under Chapter 13 or Chapter 7.