26 Jul Can I keep my car if I file bankruptcy?
Clients want to know, will I keep my car if I file? How can I file bankruptcy and still maintain the vehicle I need to get to and from work? How can I be sure that I won’t lose my car?
In most cases we file, debtors do NOT have to fear that their main source transportation will be interrupted. There are five reasons, in most cases, you do keep your car.
1. Your car is usually not as valuable as you think. If your car has a lien or a loan on it, it has little or no value to it. Assets with little of no value are not typically assets that trustee wants to administer in your bankruptcy estate. There are two common situations with clients who have a lien on the car. Either the car is not really that valuable, so if you were to sell the car NOW you would get little or no cash for it. Or, you are “upside down”, meaning that you owe more on the car contract now, than the car is really worth now. In both of these fact patterns the trustee, the person who reviews your petition for accuracy and examines your assets, is not concerned with a car that is valueless.
2. My car has some value. Ok, if the car has value you are entitled to use, and your bankruptcy lawyer will schedule, an exemption to protect the car. This means that if the car has some value you are permitted to retain the car as long as it does not exceed a certain value. So, there is a motor vehicle exemption for cars with value to protect the car. For cars that have even MORE value you may be able, in some cases, to use the “wildcard or catchall exemption” to protect the car as well.
3. I am current on the car and do not want to include the car. Well, the car is always listed in your bankruptcy schedules, it is how it is treated that matters. If you remain current with the car and the car has little or no value, as outlined above, and it has been properly exempted, you are likely keeping your car.
4. You will be offered a reaffirmation agreement. This is a contract between you and the lender that provides you will stay current “outside” your bankruptcy, after your case is filed, and even after it is discharged. This agreement is signed by your lawyer, reviewed by the court and filed on the court docket. The court is mainly concerned that you have a budget that will allow you to make the payments now and when the case is over. When the court approves your reaffirmation agreement and you remain current, your ride is yours! Some recent circumstances/cases have suggested that even if the court disapproves the reaffirmation agreement the lender will not take the car.
5. If you have consulted your bankruptcy lawyer and you are “out of exemptions” a skilled bankruptcy lawyer will likely suggest chapter 13 as mechanism to keep the car, so it remains undisturbed by creditors or the trustee, through a repayment bankruptcy.
So we have learned that you can keep your car when you file and not fear losing that valuable asset!
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