January 30th, 2020

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.
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If you have questions about how your car or other property might be treated in bankruptcy, call Owings Law today.