Whether you’re considering bankruptcy or have already filed, it’s important to understand the different types of bankruptcy and how they can affect your car. In general, bankruptcy is an excellent way to regain control of your finances, but it can be detrimental to your credit for seven to 10 years. That said, if you can get your financial house in order and pay off your car loan, you may be able to keep your car after bankruptcy.
The ability to keep a car in bankruptcy is dependent on the type of bankruptcy you file and the value of your car. A bankruptcy trustee will determine the value of your car and take into account your loan balance. You may be allowed to pay the lender a small amount of the fair market value of your car. Or, your lender may decide to auction off your car and use the proceeds to pay your loan balance.
If you’re filing a Chapter 13 bankruptcy, your car isn’t taken away from you, but you’ll be required to keep up with your monthly payments. You may also be allowed to reaffirm your debt and agree to a new payment plan with your lender. A reaffirmation can be a useful tool in your efforts to keep your car, but it can also be a risky proposition.
A bankruptcy trustee may also decide to give you the best of both worlds and let you keep your car without making any payments. The process for this isn’t exactly straightforward. You’ll need a receipt from your lender and a co-signer. Once you have all the necessary paperwork in hand, the trustee will determine the fair market value of your car and put that money in a pool for your creditors. However, if you don’t have enough money to pay the fair market value, your trustee may choose to leave your car out in the cold.
In addition to the fair market value, a bankruptcy trustee may also decide to use the reaffirmation agreement to reduce your car loan. This is particularly beneficial if your car is worth more than the reaffirmation allows. However, your trustee will want to make sure that you have the means to make the payments, so don’t count on this to be a magic bullet.
A bankruptcy trustee may also ask for a printout of your car’s fair market value. While it’s not technically possible to know exactly what you’re entitled to in your bankruptcy, a calculator or appraisal may help you figure out the fair market value of your car. The best way to find out what you’re entitled to is to consult a bankruptcy attorney. They can help you sort out the different exemptions and decide which of them is the best fit for your situation.
The best way to know if you can keep your car in bankruptcy is to check with a qualified bankruptcy attorney. They can give you an overview of the different bankruptcy types and explain how the various rules of thumb apply to your situation.
