There are certain questions that loom large for people considering filing for bankruptcy, and one of the biggest is whether they will be able to keep their car. The reason for the question’s prevalence is obvious: people need their cars in order to continue going to work, to shop for food, to attend doctors’ appointments, and more. The loss of a vehicle is the loss of freedom, so getting the answer is important.  Unfortunately, there’s no one-size-fits-all response, and a lot of the determination will depend upon the specifics of your situation.  Here’s what you need to know:

  • Filing for a Chapter 13 bankruptcy offers your best chance for keeping your car. That’s because under this type of bankruptcy filing you do not discharge your debts as much as reorganize them into a new repayment plan. Payments may be spread out over a longer period of time then what was initially agreed to, interest rates may be lowered or some of the debt discharged, but you are able to keep your property. You may even be able to lower the amount of your car loan if the loan has a greater value than the car.
  • Filing for a Chapter 7 bankruptcy has the advantage of canceling all of your debts (with the exception of child support, student loans and other nondischargeable debts), but also puts you at risk of having to give up some of your property so that they can be sold to pay off your creditors. Your equity in your vehicle may be considered exempt up to a certain value, and if your equity exceeds that value there are often workarounds available, such as wildcard exemptions or trading other property that you’re willing to part with in return for keeping your vehicle. However, that does not always work and there are scenarios where your bankruptcy trustee may say that they have to take your car and sell it.

If you have fallen behind in your car loan obligations, then there’s a good chance that your car will be taken unless you can negotiate something with the lender. In some cases, this means paying what you owe, while in others you might arrange a new payment plan or pay the lender the car’s replacement value. This is only an option where the bankruptcy trustee has already indicated that your vehicle is exempt or they have decided not to sell it.

Finding a solution to the problems surrounding your car during a bankruptcy is just one of the ways that our bankruptcy attorneys can help you through this difficult situation. Contact us today to learn more.

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