Those looking to restructure or eliminate their debts have the option to file for bankruptcy, though it can easily be one of the most challenging decisions you can make. On the other hand, it can also provide relief and a fresh start for those struggling with overwhelming debt.
But do you keep some of your assets, namely your car, when filing? The answer depends on the type of bankruptcy and the car’s value, along with what you need the vehicle for.
How Bankruptcy Affects Car Ownership
Chapter 7 and Chapter 13 bankruptcy are the two main options individuals can file for. Chapter 7 bankruptcy is also known as liquidation bankruptcy since it involves selling off some of the debtor’s assets to pay off creditors. Chapter 13 bankruptcy, on the other hand, consists of a repayment plan where the debtor agrees to pay off a portion of their debts in three to five years.
Chapter 7 Bankruptcy
If you file for Chapter 7 bankruptcy, the court will appoint a trustee to review your assets and determine which ones you should sell to pay off your creditors. The trustee will consider the value of your car and whether or not it is necessary for your job or daily life.
If the car’s value is high and you do not need it for work or other essential purposes, the trustee may sell it to pay off your debts. Otherwise, if the car is necessary for your job or daily life and its value is low, you may be able to keep it.
In most states, there is an exemption for a certain amount of equity in a car. This means that if the value of your vehicle is less than the exemption amount, you can keep it without having to pay off the creditor. The exemption amount varies by state, so it is essential to check with a bankruptcy attorney to determine the amount in Texas.
Chapter 13 Bankruptcy
If you file for Chapter 13 bankruptcy, you can keep your car as long as you continue to make your monthly payments. Chapter 13 bankruptcy involves creating a repayment plan where you agree to pay off a portion of your debts over three to five years.
If you have a car loan, the trustees may include the monthly payments for the car in the repayment plan. As long as you make the monthly payments, you can keep your car.
What Happens If You Fall Behind On Payments?
If you cannot make the monthly payments on your car loan, the creditor may repossess the car, even if you filed for Chapter 13 bankruptcy. Take note that any payments for car loans that you exclude will still need to be carried out. Make sure that you list down your car loan when you file for bankruptcy.
Bankruptcy Assistance Within Reach
Your car is important to get you places. Losing your car means losing the primary mode of transportation that you need to get to work, among others. Fortunately, you can still keep your car in bankruptcy as mentioned above.
It is crucial to speak with a bankruptcy attorney to understand your options and determine the best course of action for your specific situation. For specific concerns, contact Lincoln-Goldfinch Law and speak with a bankruptcy attorney.
Summary: Can You Keep Your Car In Bankruptcy?
You do not necessarily lose your car after filing for bankruptcy. Chapter 7 bankruptcy exemptions allow you to keep your car if its value is within the limit and it is deemed necessary in your everyday life. Chapter 13 bankruptcy does not take away your assets but will instead allow you to keep your car while you continue making your monthly payments. Let an experienced bankruptcy attorney help you determine the most suitable course of action for your situation.