What Happens to Cars When I File bankruptcy?
- I receive this question in almost all bankruptcy cases, and I always assure my clients they will keep their cars if they want to and follow my instructions.
Do you Automatically Lose your Car When you File Bankruptcy?
- Another question that I frequently receive from my bankruptcy clients.
- The Simple Answer is: No.
- You can keep your car when you file for bankruptcy if you want to.
Filing for Chapter 7 Bankruptcy versus Chapter 13 Bankruptcy has different effects on your cars.
Below are the effects of Chapter 7 Bankruptcy versus Chapter 13 Bankruptcy
Before you decide which bankruptcy you should file or how to handle your car in bankruptcy, contact me:
Ralph A. Ferro, Jr., Esq., for a free in-person bankruptcy consultation
Chapter 7 Bankruptcy Effect on Your Car
If you are behind on your car payments, options:
- Keep your car (must be current or become current)
or
- Surrender your car
If you are current with your payments and want to keep your car, you can enter into a new contract with your lender (reaffirmation agreement or a lease assumption agreement)
This is basically a new debt.
Surrendering Your Car Chapter 7 Bankruptcy
You are no longer responsible for your debt when you file Chapter 7 Bankruptcy & surrender your car.
Is there equity in your car? You could receive the difference between the car’s sale price and your equity.
Example of Equity in Your Vehicle:
- Vehicle Value: $12,000.00
- You Owe $10,000.00
- There is $2,000.00 equity
Most of the time, the cars are not sold for more than your equity
Chapter 13 Bankruptcy Effect on Your Car
- Chapter 13 Bankruptcy is a reorganization of your debts.
- You pay something back to your creditors
- I will work with you as your NJ bankruptcy attorney to develop a Bankruptcy Plan that is affordable for you and your family.
Surrendering your vehicle in a Chapter 13 Bankruptcy
- No Objection for your Lender:
Your vehicle debt is wiped out in full satisfaction of your debt. It is not part of your Chapter 13 Bankruptcy Plan payments
- Objection from your lender:
Lender files a proof of claim, and the unsecured portion of this debt is added to your Chapter 13 Bankruptcy Plan, and the amount is repaid to your creditor in accordance with your Chapter 13 Bankruptcy Plan payments to the Trustee.
Keeping Your Vehicle in a Chapter 13 Bankruprcy
Current with payments:
Monthly payments (finance or lease) are included in your bankruptcy filing expenses, and you pay your creditor directly.
Not current with payments:
The amount you are behind is included in your Bankruptcy Plan and paid by the Trustee. These payments are spread out over the life of your plan.
Car is paid in full with no debt:
You just keep your car.
Can you purchase a new lease or car finance while in bankruptcy?
- After Chapter 7 Bankruptcy, purchase of a new car or lease
- Yes, you can. The lender decides on the terms
- During a Chapter 13 Bankruptcy, purchase of a new car or lease?
- Yes, you can.
- I work with my clients on different contract terms to gain Court approval. The Bankruptcy Plan may need to be modified.
What happens to Cars When You File Bankruptcy?
Final Takeaway
Treatment of your Vehicles in Chapter 7 Bankruptcy versus Chapter 13 Bankruptcy differs, but you can keep your car in either bankruptcy if you wish.
I welcome the opportunity to meet with you to understand your final goals. I will advise you on what is best in your situation when filing for bankruptcy regarding your assets.
Find out more about me and my bankruptcy services
Please read my client reviews – I take the time to work with clients so they feel comfortable in making important life-changing decisions in filing for bankruptcy
- See why a smaller bankruptcy firm provides you with the best bankruptcy advice and care.
- I always meet personally with clients. You should never make a decision about hiring a bankruptcy attorney without meeting them in person.
- A face-to-face consultation is necessary.
Contact me today and learn what happens to your cars when you file for bankruptcy.
