Joe filed Chapter 7 bankruptcy and decided he could not afford the car, so he surrendered it. Exemptions are specific to where cases are filed and vary by state law.
Nonexempt property is not protected through Chapter 7 bankruptcy and can be taken by the trustee and sold to pay back your unsecured debt. If a bankruptcy filer wants to keep otherwise nonexempt property, they can usually pay the trustee the value of the property.
This is generally an option because the creditors will ultimately get the same amount whether the nonexempt asset is sold by the trustee or is bought by the filer. When you are struggling financially, bankruptcy might be your best option. However, this decision can significantly impact your assets, including your vehicles. A car is an essential item for most people, and you may be worried about losing it.
Filing for bankruptcy is an excellent way to prevent lenders from collecting their debts and assets related to it. However, the lender can go to court and lift the automatic stay that is why you need dedicated Oklahoma City bankruptcy attorneys to protect your interests. You may have heard of the concept of pay and drive in bankruptcy law. The law allowed drivers to keep their vehicles as long as they stayed current on payments.
Pay and drive hasnt been a part of bankruptcy law since You must pursue one of the other options to keep your vehicle in a Nevada bankruptcy. Bankruptcy filings are public information, and there are certain ways people who know you, including a potential employer or your current one, may find out youve filed. All court records, including bankruptcies, are available for a small fee through the Public Access to Court Electronic Records. This system is used mostly by people who want to have access to court records lawyers, journalists and, yes, creditors.
Newspapers used to print court news, including local bankruptcy filings, but generally dont anymore. Newspapers still print court-related public notices, also known as legal notices, usually in the classified ad section of the paper.
These are notices that are required by law to be published and generally dont include bankruptcy filings. Employers are increasingly screening potential employees, according to HR. If you file for Chapter 7 bankruptcy, all your previous creditors will be off your hook. Therefore, most car dealers are willing to give you a car on credit since you wont be able to file for another bankruptcy for the next eight years.
Your vehicle may, however, be counted under an exemption that protects it from repossession. In general, the following is considered to determine if you'll be able to keep your car:.
Read on to learn more about what you can expect to happen to your vehicle when you file bankruptcy. Filing for Chapter 7 bankruptcy can clear some unsecured debts, but it may also require selling or giving up some assets to pay debts.
The items that are exempt from liquidation, and the value that can be exempted, varies by state. If you file for Chapter 7 bankruptcy and local bankruptcy laws allow you to exempt all of the equity you have in your car, you can keep the vehicle—as long as you're current on your loan payments.
And if the market value of a vehicle you own outright is less than the exemption amount, you're in the clear. To determine how much equity you have in the vehicle, subtract your current loan balance from the car's value. Because vehicles tend to depreciate in value fairly quickly, you may not have much equity unless you're nearing the end of your loan term.
Once you've determined how much equity you have in your vehicle, take a look at what the motor vehicle exemption is in your state. If you have less equity than the exemption limit, the car is protected. Another form of bankruptcy is Chapter 13 , which works a bit differently from Chapter 7. Rather than liquidating non-exempt assets to repay creditors, you'll enter a debt repayment plan.
Your property isn't sold off with this form of bankruptcy; instead, your finances are reorganized and you'll begin the process of repayment. If you own your car outright you'll be able to keep it. You will have a repayment period of either three or five years, and once that period ends, some remaining debts can be discharged—meaning you don't have to pay them anymore.
Not all debts can be discharged, however. Credit card and medical debt can be discharged, for example, but mortgages and student loans cannot. Keep in mind that if you aren't able to catch up on your auto loan, or you can't afford repairs or payments on the car anymore, you can get out of payments by surrendering the car back to the lender, which, as mentioned, has credit consequences.
When you file for Chapter 13 bankruptcy, you propose a plan to pay back some or all of your debts over a three to five-year period. A bankruptcy normally discharges your personal liability on a car loan but does not wipe out the lender's lien on the vehicle.
So if you want to keep the car, you must continue making payments to your lender. Otherwise, the lender has the right to repossess the car. In most cases, you pay off your car loan through your repayment plan. You make a monthly plan payment to the bankruptcy trustee and he or she sends a portion of that payment to your car lender.
Depending on where you live, certain courts also allow debtors to exclude their cars from the plan and make regular payments outside of bankruptcy. However, if you don't include your car loan in your plan, you may not be able to take advantage of certain benefits like a Chapter 13 cramdown discussed below. If you are in Chapter 13 bankruptcy, your lender cannot repossess your car because of the automatic stay.
In order to get paid, the lender must file a "proof of claim" with the court showing how much you owe including all arrears amounts you are behind on. Unless you object to the lender's claim or cram down the loan, the entire principal balance including your arrears will be paid off through your plan. Filing for bankruptcy doesn't mean that you'll have to give up your car. But it's not a given that you'll be able to keep it either.
Being able to retain your vehicle in bankruptcy depends on the amount of equity, whether you can continue paying the loan if any , and the bankruptcy chapter that you choose to file. When you file bankruptcy, you won't be left destitute.
Each state decides which property its residents can safeguard with bankruptcy exemptions. The state's exemption list will cover key assets that you'll need to maintain a home and job, such as clothing, household goods, electronics, work tools, retirement accounts, and, in most cases, some equity in a homestead and equity in a vehicle. Exemption amounts vary by state. Even so, because most people don't own high-status items such as recreational vehicles, boats, and luxury cars, bankruptcy debtors can often protect all—or at least most—property in bankruptcy.
What happens to nonexempt property will depend on the bankruptcy chapter filed. Whether you can keep the car will also depend on whether you owe money on it.
A car loan is a "secure" loan, which means that if you stop paying it, the lender can sell the vehicle at auction and use the proceeds to pay the balance—even if you file for bankruptcy. So, you'll need to be able to continue making your vehicle payments after filing, and, if you're behind on your payments, you'll have to find a way to bring them current options discussed below. Each chapter offers different benefits. Once you understand that you'll have to pay for any car that you'd like to keep and you know how much equity you can protect, you'll be ready to decide which bankruptcy option is best for you.
For instance, Chapter 7 bankruptcy is an excellent choice for those who can protect all equity and are current on payments. Chapter 13 bankruptcy works well if you're behind on payments or you have a significant amount of nonexempt equity and would still like to keep the car. Your vehicle will be protected in Chapter 7 bankruptcy if you're able to exempt all equity and you own the car outright. If you can't exempt all of your equity, the bankruptcy trustee appointed to your case will sell the vehicle and distribute the proceeds to your creditors.
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