Filing for bankruptcy can be a hard choice, but it can also give people who are struggling with debt a fresh start. One of the biggest concerns for many people when considering bankruptcy is whether they will be able to keep their car. Fortunately, the answer is often yes. In this article, we will explore the options available to help you keep your car during bankruptcy.
Chapter 7 Bankruptcy.
In chapter 7 bankruptcy, most people are able to keep their car by reaffirming the car loan. This means that the car debt will not be included in the bankruptcy discharge and you will continue to make payments on the loan. Your car creditor may even be more likely to agree to this arrangement because you will have gotten rid of other debts and be in a better position to keep up with the payments. However, it's important to note that if you fall behind on payments after reaffirming the loan, the creditor can repossess your car.
Another option in chapter 7 bankruptcy is redemption, where you pay the value of the car instead of the full amount owed. This can be a great way to keep your car and pay less than you owe, but it requires a lump-sum payment which may not be feasible for everyone.
Chapter 13 Bankruptcy.
If you are behind on your car payments and your creditor is threatening repossession, chapter 13 bankruptcy can help. In chapter 13, you can catch up on missed payments and keep your car while also getting rid of other debts. Additionally, if you owe more on your car than it is worth, you may be able to cram down the loan. This means you will pay the value of the car instead of the full amount owed and the interest rate may change as well. However, to be eligible for a cram down, you must have purchased the car more than 910 days (approximately 2.5 years) before filing for bankruptcy.
Do you Own Multiple Cars?
You can own multiple cars during bankruptcy and there is no specific limit on the number of cars you can have. However, there are limits on the amount of equity you can protect in a vehicle. You can protect up to $4,450 in equity per person in one vehicle. So, for example, if you own a car worth $4,450 that is free and clear of any debt, you can protect it through the auto exemption.
Final Thoughts Keeping your car during bankruptcy is often possible, but the best choice for you will depend on your specific financial condition. Consult with one of the bankruptcy attorneys at Almeida & Davila to understand your options and ensure that you can keep your car while getting rid of debt. You may also be surprised to learn that there are other car options available to you before or after filing for bankruptcy, such as getting a new car or redeeming your current car. Regardless of the path you choose, the goal is to keep your car and provide yourself with a fresh start and financial stability.