Irrespective of the bankruptcy chapter you file under, if your car payments are current, you can keep the vehicle when you file for bankruptcy, say Los Angeles based bankruptcy law firm Recovery Law Group. Here’s what happens in different bankruptcy chapters:
Chapter 7 bankruptcy
If you wish to keep your car during this bankruptcy chapter, you need to reaffirm the loan. If you are current on the payments, you can continue making payments and a Reaffirmation Agreement will be provided by your loan financer. Once you sign the agreement, it will be filed in court, thereby reaffirming your debt. This means that you will be liable to pay the remaining amount due on the vehicle even after bankruptcy.
There are exemptions available to debtors when they file for bankruptcy. In case your equity in the vehicle is covered by the exemption, you can keep the vehicle free and clear. If, however, you have equity in the vehicle more than the exempted amount, then the trustee might ask you to sell the car in order to pay your unsecured creditors. In case you wish to keep your vehicle when the exemption amount doesn’t cover the entire equity in the vehicle, you need to pay the remaining amount to the bankruptcy trustee. You can pay the remaining amount in the time period of 12 months.
Chapter 13 bankruptcy
Chapter 13 involves a repayment plan. You can include the car loan payments in this plan or make payments outside of the plan. In case you are current, the amount won’t change, but, if you are behind on your car loan payments, you can catch up on past payments through the Chapter 13 plan. The increased car payments will continue until you catch up on them. In case, your equity in the vehicle is more than the exempted amount, then you need to pay the bankruptcy trustee additional amount to keep your vehicle. You can keep your car without any extra payments if the equity is within the exempted limit.
It is important that if you are contemplating bankruptcy, then you consult experienced bankruptcy lawyers at 888-297-6023 to know how to protect your vehicle and other assets.