For the majority of individuals, having dependable transportation is a must. To travel to work, school, or a doctor’s appointment, you’ll need a car. The majority of us can’t picture life without our own automobile. While considering bankruptcy, you probably wonder, “Can they take my car in Chapter 7?” Luckily, declaring bankruptcy does not preclude you from owning a car, truck, or motorbike.
The first question is whether or not you have any equity in your automobile. The gap between what you owe and what your car is worth is equity. If you owe more on your car than it is worth, you have “negative equity,” or no equity at all. You are allowed to preserve a fair amount of car equity under bankruptcy regulations. If this sum is insufficient to properly safeguard the car, you may be able to protect your vehicle equity through various legal exclusions. Finally, you can buy the equity from the Chapter 7 trustee if you have more car equity than you can lawfully preserve.
The second factor to examine is your lender. Reaffirmation, redemption, and surrender are the three choices for dealing with car loans in Chapter 7 bankruptcy. A contentious “fourth option” exists in some jurisdictions and circumstances. Consult your Louisville bankruptcy lawyer to determine if your case is eligible.
Can You Keep Your Car If You File Bankruptcy?
You can sign a reaffirmation agreement if you want to keep making monthly payments. This is a contract that specifies that the lender’s debt will survive the bankruptcy and that the lender will not repossess the car. In rare circumstances, a reaffirmation agreement can be used to revise the original contract. If you’ve missed a few payments or want to lower your interest rate, this is a good option.
You might want to consider a redemption if your car is significantly “upside down.” In a redemption, the debtor pays the lender the vehicle’s fair market value. The payment is given in one lump sum, which generally necessitates a second high-interest loan. Even with the high interest rate, the new monthly payment for a car worth thousands less than what is due may be hundreds less.
Surrender is the final option. It’s often preferable to just walk away from a lemon or a poor bargain. You just hand over the automobile to the lender and owe nothing in a Chapter 7 bankruptcy. It is possible to buy a different car during or after your bankruptcy process. Consult your Kentucky bankruptcy attorney if you need to acquire a new car.
The bankruptcy laws of the United States have robust safeguards for preserving property and lowering debt. In Chapter 7 or Chapter 13 bankruptcy situations, there are several alternatives. Consult a qualified bankruptcy attorney to learn about your alternatives under federal law. At O’Bryan Law Offices, we offer a number of options for our clients, including credit counseling, debt counseling, and bankruptcy planning and asset protection. Contact our office at 502-339-0222 to schedule your free initial consultation.