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Will I Lose My Car in a Bankruptcy?

Will I Lose My Car in a Bankruptcy?

Whether or not you can keep your car in a bankruptcy really depends on your specific situation. Since it is considered an assets, it must be listed in the schedule of asset, along with any other property or assets you might own. If you owe money on the vehicle, then you will also have to list it in your schedule of debts. The short answer to this question is, yes, you can keep your car if you can afford it. However, as straightforward as that sounds, it is actually not that black and white.

Filing a Chapter 7 Bankruptcy

If you are filing a Chapter 7 bankruptcy and owe money on those wheels, the good news is that this form of bankruptcy will discharge the unpaid balance on that debt. Unfortunately, the law also permits car lenders to repossess vehicles when a person files for bankruptcy unless they are able to redeem the collateral or reaffirm the debt.

  • Reaffirming debts: Before the court discharges your debts in a Chapter 7 bankruptcy, you will have to sign a new agreement to pay off your debt on the vehicle. Otherwise, your debt will be eliminated, but the lender will still be able to repossess your car. That said, if you sign a reaffirmation and default on your payments, the lender can still repossess your car and sue you for the remaining amount you owe.
  • Redemption: A redemption occurs when you pay the replacement value or unpaid balance of the car. However, you will have to do this with cash or with a new loan. Given that your credit will be severely damaged after filing for bankruptcy, the interest on your loan will be at least 20%.

Filing a Chapter 13 Bankruptcy

If you want to keep your car and plan on filing for a Chapter 13 bankruptcy, you might also be able to keep your car. The repayment plan you draft for your Chapter 13 bankruptcy should provide for payments on your car loan and, after you make all of your payments, the discharge will not impact the unpaid balance on the loan. You can also surrender your vehicle to the lender in a Chapter 13 bankruptcy, which will eliminate the amount you owe on the loan.

Schedule a Consultation with a Bankruptcy Attorney Today!

If you are filing for bankruptcy, but are looking for options to hold onto your vehicle, contact the legal team at Bach Law Offices to discuss your options. Our knowledgeable bankruptcy attorneys will help you choose the path that best suits your needs and goals.

Contact our office today at (847) 448-0025 to schedule a consultation with one of our attorneys and get started on working toward a better financial future.

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