Having a vehicle is no longer luxury, it has become a necessity. You need it to commute between your office and home and to drop your kids off to school. However, bankruptcy is a trying time and you might find it difficult to hold on to assets in such cases. According to Dallas based bankruptcy law firm https://www.recoverylawgroup.com/, state and federal exemptions can be used to keep your property, including home and car as long as you can prove that the latter is a necessity and not a luxury.
Since most people take automobile loan while purchasing a car, the payments can continue as before even in case you file for bankruptcy. However, the situation changes slightly when you file for bankruptcy. Depending on which exemption you opt for, you need to determine the equity in the vehicle. If the equity in the vehicle is more than the exemptions, you can opt for wild-card exemption (if allowed in your state) to protect the remaining equity. In case, you are unable to exempt all equity in the vehicle, you can either:
- Surrender the vehicle to the trustee for liquidation in case of Chapter 7 bankruptcy; or
- Pay the remaining equity in the vehicle to the trustee in order to keep it.
Generally, trustees allow monthly payments to cover the equity. However, before going ahead with any plan, it is important to know that the bankruptcy trustee conducts 2 tests to determine whether you can keep your vehicle or not:
1. Whether you can afford to pay the monthly payments to keep the vehicle?
2. Whether it is fair to your creditors or not?
The U.S. Bankruptcy Code states that in case you wish to keep any non-exempt property in a Chapter 13 bankruptcy, you should pay your creditors the amount they would have received if the property had been liquidated (as in Chapter 7 bankruptcy).
If what you owe on your vehicle is more than its worth, then you can opt for a Cram Down. In this case, a Chapter 13 bankruptcy filer can ask the judge to establish the value of the vehicle and reduce the secured loan amount to that value. Any amount over the vehicle’s current value becomes a part of the unsecured debts which are then discharged on completion of the Chapter 13 repayment plan.
There are more ways to save your vehicle when you file for bankruptcy if you can prove that it is a necessity. An experienced bankruptcy lawyer can help you with this. You can call 888-297-6023 to consult with qualified bankruptcy lawyers to discuss your case.