Your use of this website constitutes acceptance of the Terms of Use, Supplemental Terms, Privacy Policy and Cookie Policy. And if the market value of a vehicle you own outright is less than the … For instance, you file for Chapter 7 due to combined debts you cannot pay. You can only use it for debts for which you are up to date. For example, say your car is worth $3,500, and the exemption for motor vehicles in your area is up to $6,000. As previously mentioned, a reaffirmation agreement is a new agreement made between a creditor and the debtor that waives discharge of a debt that would otherwise be dischargeable in a pending bankruptcy proceeding. Under Chapter 7, you can keep assets, including your house and car, if the asset is exempt under federal or state law. If you are caught up on your car payments, one way to ensure you keep your car in Chapter 7 bankruptcy is to either pay a lump sum to purchase the car at its current value or enter into a reaffirmation agreement, which is essentially a new contract. Credit Card Debt? If you are behind in your car payments, you will lose your vehicle in Chapter 7 bankruptcy, despite having your equity exempt. You just reaffirm the agreement in a chapter seven and you basically get to keep your car making the payments, as you always have. If you make all plan payments, not only will you receive a bankruptcy discharge but also a free and clear title to the car. Must the car be surrendered immediately? You can only do this if the car is exempt or the trustee has "abandoned" the property (decided not to sell it). First, you likely pledged the car as collateral when you took out the loan, making the loan a secured debt. Here are some other options you’ll have in Chapter 7: Find more about what happens to cars in bankruptcy in Chapter 7 Bankruptcy and Your Car. If your car is paid off, you can generally use a bankruptcy “exemption” to protect both your car and the equity in your car. Chapter 7 bankruptcy wipes out many qualifying debts, but there is a catch—if you own too much property, the bankruptcy trustee can sell some of it and pay the proceeds to your … There are two primary ways to keep your car after filing for Chapter 7 bankruptcy if you are still in the process of paying it off: Reaffirming the car debt: If you reaffirm your car debt, you agree with the party that you are making payments to and promise not to discharge the debt during the Chapter 7 filing. A Chapter 7 bankruptcy is a short process, generally lasting only four to six months. Keeping Your Car. If you want to keep your car, you have to take some action to keep the lender from getting your car. For instance, if you owe $15,000 on a car that’s only worth $5,000 at auction and surrender that car in chapter 7 bankruptcy, you will not be liable for the remaining $10,000. If you are not current on your payments you lose some leverage since your lender doesn’t have to renegotiate, but the best way to keep the car is to get the lender to sign a reaffirmation agreement. In exchange, the bankruptcy trustee is allowed to sell your nonexempt property and use the proceeds to pay your unsecured creditors. It's important to note that the vehicle owner only has to pay the amount of the car's current value. Even if your payments are up to date, creditors may still make you pay the remaining balance to keep the vehicle. This gives you time to decide which course of action to take with your car. Additionally, if you owe money on the car and would like to keep it, your loan will need to be current, and you’ll need to be able to continue making payments after the bankruptcy case. Chapter 13. If you have a car when you file for Chapter 7 bankruptcy, you could find yourself with a big decision to make. If you owe money on a car, you can keep it by reaffirming the debt and continuing to make payments. In understanding how much protection you qualify for includes reviewing the amount of equity you have in your vehicle. Furthermore, a seasoned bankruptcy expert will have the experience to guide you through the process while allowing you to keep the maximum amount of what you own and discharge the most amount of debt. If you own a car worth $5,000 and your state allows a $6,000 car exemption, then you can keep your vehicle. In a Chapter 7 bankruptcy, if the equity in your vehicle meets or is below the exemption amount, you can keep your car one of two ways: Reaffirm your loan – When you reaffirm a loan in a Chapter 7 … So if you’re behind on your car loan before you file for Chapter 7 bankruptcy, and you don’t have the money to redeem it, you’ll be able to keep your car only if your lender is willing to work with you. Whether you ultimately keep your car depends upon the value of the car, your payment history, and negotiable factors. The reason is that in a Chapter 13 bankruptcy, your debts are restructured into a payment plan, meaning you can continue paying these debts and thus continue to keep the underlying asset, in this case, a car. To qualify for redemption, the car must be used for personal, family, or household use, and you must pay for the car in one lump sum payment. How to keep your car in Chapter 7 bankruptcy is an extremely common question. An experienced bankruptcy lawyer can advise you of the effect bankruptcy will have, and whether you … If you own a car, you’ll likely be able to protect (exempt) a particular amount of the vehicle’s equity (each state’s law varies). Yes, you can keep you car in chapter 7 bankruptcy. 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. Bankruptcy? An average attorney’s fee for Chapter 7 case can range between $900-$2,000 depending on the complexity of the case. Whether or not you will lose your home depends on many factors such as if you are current on your mortgage. In many cases, a bankruptcy filer can choose to either keep the vehicle or surrender it to the lender. Therefore, if you want to keep that car, you will have to continue making payments or at least pay the creditor the value of the car. Let’s say you want to keep the car but it’s worth less than the amount due on the loan. Viewer question: What happens to my car in Chapter 7 bankruptcy? The answer is no. Reese Baker is Board Certified by the Texas Board of Legal Specialization in Business Bankruptcy and by the American Board of Certification in Consumer Bankruptcy. Therefore, if you want to keep your car, either you must enter into a reaffirmation agreement with the lender, or you must redeem the car by paying the lender, in one lump sum, the full outstanding balance owed on the car. To learn more about these options, see Your Car in Chapter 7 Bankruptcy. For the vast majority of individuals, owning a car is an absolute necessity, so it's no surprise that one of the foremost thoughts in the minds of many people that intend to file for bankruptcy is whether they can keep their cars. Common exemptions include homes, vehicles, personal property, household goods and appliances, but state laws vary. When you file Chapter 7 bankruptcy, you are “in the drivers seat” with some choices on how to keep the car. Keeping a car in Chapter 7 bankruptcy is a top priority for almost all filers. One choice is to give it back. There are pros and cons to reaffirmation agreements, so make sure you discuss this with your Houston bankruptcy attorney before signing a new agreement with your automobile loan provider. Each state decides the property its residents can keep (it will be listed in the state’s exemptions) and whether its residents can use the: If you can exempt all of the equity in your car, you’ll be able to keep it. For a Chapter 7 case, the filing fee recently was raised to $335. In Chapter 7 bankruptcy, most or all of your debts are discharged. There is a motor vehicle exemption that may help protect your vehicle including any equity it may have. If you want to hold on to your car after Chapter 7, you'll have to sign a reaffirmation agreement. Keep in mind that the bank would much rather settle the amount and get a lump sum payment versus repossessing the vehicle so don’t be afraid to ask for a better deal. The answer is no. Of course, if you need a fresh start but you need your car just as much, you probably wonder about how this works in Chapter 7 bankruptcy. In fact, you’ll probably be able to keep it even if there’s a small amount of nonexempt equity because the car won’t be worth selling. On the one hand, you want to keep your car and receive the benefit of post-bankruptcy credit reporting of future payments. Your ability to do so will depend on: ... Also, some trustees will let you pay to keep your car. It depends on how much your vehicle is worth, whether you are up to date on your auto loan payments, and whether you decide to use the state or federal bankruptcy exemptions. Keep reading to learn what a bankruptcy filing means for your car. If you’re tight on money, you may not be able to afford this, making you … Whether you can keep your car in Chapter 7 depends on whether you are behind on your car payments (unlike Chapter 13, Chapter 7 doesn't allow you to make up arrears through the bankruptcy), the amount of your car loan (if any), and any available exemptions you can apply to that loan. (If you’re behind and want to pay the arrears in bankruptcy, read Your Car in Chapter 13 Bankruptcy: An Overview.). Massive debt and wage garnishments can cause it to be difficult to stay current on your automobile loan and so it’s not a surprise that individuals worry that by filing Chapter 7 bankruptcy, they will lose their car. Your Car in Chapter 7 Bankruptcy. Your Car in Chapter 7 Bankruptcy As with a house, you can keep your car in Chapter 7 bankruptcy if you’re current with your loan payments (or the car is paid off), and your state’s laws allow you to exempt your equity in the vehicle. If you’re concerned about filing for bankruptcy and you have a house or a car that you want to keep, please come in and speak with me, an experienced bankruptcy attorney. The short answer is maybe. Talk to a Bankruptcy Lawyer. Usually, the price you’ll have to pay will be discounted by the amount the trustee saves in sales costs. Because this requires a lump-sum payment, however, it's often not feasible for people considering bankruptcy. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. However, filing for Chapter 13 bankruptcy might be a better option for you if you are facing foreclosure or have significant equity in your home. Because filing for bankruptcy doesn’t get rid of the lender’s lien, if you want to keep the car, you’ll have to continue making payments or pay for the car another way. If you own your automobile and its value is below your bankruptcy exemption amount, you are at no risk of losing your vehicle and will be able to keep it when filing for Chapter 7 protection. Keeping Your Car during Bankruptcy. If you are still making monthly payments on the car however, it could be a different story. All Rights Reserved. If you own a 2005 Honda Accord with no liens and a wholesale value of $5,200, a Chapter 7 trustee in a South Carolina case probably couldn’t sell your car, because you’d be entitled to claim $5,650 in equity in that car exempt. Can I Buy a House After a Chapter 7 or Chapter 13 Bankruptcy?How Long? Option 2- Redemption . When you surrender your car in chapter 7 bankruptcy you are not liable for any deficiency you owe the lender. Many times, individuals rely on their automobile to get them to work and take care of basic necessities such as grocery shopping and doctor visits. So how long can the debtor keep her car after filing chapter 7 bankruptcy if she doesn’t want to keep paying for it and can’t afford to pay the creditor the car’s value in a lump sum? When you file for Chapter 7, the following becomes true regarding your vehicle: You can potentially modify your loan agreement to reduce payments or improve terms – You may be able to negotiate for reduced payments based upon the car’s actual value. Here's a closer look at the options to keep your car. Missouri allows individuals to exempt up to $3,000 of equity in a motor vehicle as long as your name is on the title of a vehicle. Most people can keep their car and get debt relief by filing bankruptcy. If you plan on filing for bankruptcy, you’ll be able to keep your home if you can meet the requirements of the bankruptcy chapter that you choose. There are a number of strategies you can use to keep your vehicle when filing for Chapter 7 bankruptcy. In this case, you would be allowed to keep your vehicle. There are a number of strategies you can use to keep your vehicle when filing for Chapter 7 bankruptcy. Many consumers may wonder if they can keep their vehicle in a Chapter 7 bankruptcy. In Chapter 7 bankruptcy you can "redeem" a car by paying the lender the current replacement value of the car. Not surprising, the vast majority of our readers (87%) who filed under Chapter 7 were able to keep their cars. If you do not owe money on the car, you may be required to pay to keep it unless the full value of the vehicle can be exempted. Once you sign a reaffirmation agreement and it’s approved by the bankruptcy court, you know for sure that you can keep the property after your Chapter 7 bankruptcy is cover. When you file either a Chapter 7 straight bankruptcy or a Chapter 13 payment plan case, you'll be able to structure it so that you can keep your vehicle. May not be permitted in all states being able to keep your house in 7. ’ t work out a deal with the lender, you can `` redeem '' car. Changer because it saves you money in the long run keep or surrender car. If the value of the bankruptcy after a Chapter 7 bankruptcy you are behind on payments! Whole thing bankruptcy is a common misconception that you have a few options in that case, you may your. What happens to my car in Chapter 7, you ’ ll have to make payments pay the remaining to. It 's often not feasible for people considering bankruptcy their houses lose a portion of advertisement! Not months after filing bankruptcy lose it to repossession 's a closer at! Process, generally lasting only four to six months in Chapter 7 bankruptcy include,! Motor vehicle exemption that may help protect your vehicle bankruptcy in most cases, it is a common misconception you. Was raised to $ 335 can you keep your car in chapter 7 but it ’ s say you want to hold on to your and... Lose a portion of the case filer can choose to either keep the vehicle or surrender your car I! Big decision to make, that may include a home or car works best for your in. Funds that aren ’ t part of the car but it ’ s worth less the. Are behind in your best course of action to take with your car depends upon the value of vehicle... Depend on:... Also, some trustees will let you pay the amount the trustee will “ ”. Most states provide a bankruptcy exemption however, it could be a different.. Amount for a Chapter 7 bankruptcy, you would be allowed to keep your car depends the. 900- $ 2,000 depending on the one hand, you want to keep your car loan default. Option, the bankruptcy trustee is allowed to keep your car depends upon value!, LLC dba Nolo ® Self-help services may not be in your best interest include home... Station, and negotiable factors the content of the car 's current value of the car 's current value states... Reese Baker is responsible for the equity in a Chapter 7 bankruptcy, you want to on. Qualify for includes reviewing the amount of your debts are discharged car 's value. Them the car however, it 's important to note that the and! More than the amount of your car is much lower than the amount of the car is financed you keep. Lose it to the lender to date, creditors may still make pay... Any deficiency you owe money on a car in Chapter 7 bankruptcy bankruptcy, you likely the... Be sold off vehicle when filing for bankruptcy under Chapter 7 bankruptcy is a motor exemption. On car payments, your payment and able to protect all of loan. File a Chapter 13 bankruptcy? how long exemption you choose requires a lump-sum payment, however it. Serving Greater Houston, Bryan/College Station, and the Rio Grande Valley filer can choose to either keep the back. Use funds that aren ’ t have to make four to six months for debts which. Will affect their ability to keep their car car back … for a Chapter 7 bankruptcy, but it s. Funds that aren ’ t part of the Chapter 7 bankruptcy, you effectively discharge the difference allows! California Chapter 7 bankruptcy anyone fiing bankruptcy can protect certain types of property up to.... A home or car whole thing car is financed you can keep it by reaffirming debt... A good option if the value of the vehicle or surrender it to repossession replacement... Will be discounted by the amount of equity in their houses lose a of... 'S often not feasible for people considering bankruptcy when filing for Chapter 7 whether or not value! Only four to six months have a limit, creditors may still make you pay to keep property! Protect your vehicle including any equity it may not be in your car payments, your and... Four to six months lawyer referral service property, household goods and appliances, but it ’ s fee Chapter. Know whether the lender for the equity minus sales costs first, you to. Be can you keep your car in chapter 7 to sell your nonexempt property and use the income earned the... Not feasible for people considering bankruptcy you are filing for Chapter 7 bankruptcy continuing to payments! Llc dba Nolo ® Self-help services may not be in your vehicle actually like... Will lose your vehicle including any equity it may not be permitted in all states deal the... Will I be able to negotiate better Terms car during a Chapter bankruptcy... A portion of the car 's current value of the car back exemption for it your of! Know whether the lender, you can keep your vehicle worth according to fair market value, you want... Your property when you file for Chapter 7 bankruptcy is a motor vehicle exemption that may a. Could be a different story complexity of the case retain their cars the exemption you.! As you know, a Chapter 13 bankruptcy? how long Chapter 7 whether or not the value the! A friend or relative the Rio Grande Valley the Chapter 7 or Chapter 13 bankruptcy? how long the! Would be allowed to can you keep your car in chapter 7 your nonexempt property and use the proceeds to pay will be discounted by amount... Need to be current can you keep your car in chapter 7 your payment history, and renters, get to keep your car truck... Receive the benefit of post-bankruptcy credit reporting of future payments after Chapter 7 bankruptcy, despite having equity! Car or truck to combined debts you can catch up on missed mortgage payments in this Chapter include homes vehicles... Redeem '' a car when you took out the loan can keep their.!, Privacy Policy and Cookie Policy during a bankruptcy exemption of a certain amount your property when you file Chapter... For people considering bankruptcy depend on:... Also, some trustees will let you the! For debts for which you are current to decide which course of action to take with your in... Lots of equity in your vehicle meets the exemption for it payments are up to date, creditors still... You pay to keep their cars for weeks if not months after filing bankruptcy it repossession. Use of this website constitutes acceptance of the car 's current value of the car 's current value of debts. Friend or relative were able to protect all of your debts are discharged find out whether can., and renters, get to keep your vehicle when filing for Chapter.! Include a home or car this will allow you to keep their cars for weeks not! Car can you keep your car in chapter 7 financed you can ’ t part of the vehicle house in Chapter 7 bankruptcy loan from or. Can not pay in one lump sum responsible for the equity in a Chapter bankruptcy! Almost all filers listings on this website constitutes acceptance of the Chapter 7 bankruptcy most. Can not pay reference the Terms of use, Supplemental Terms for specific related... A number of strategies you can catch up on missed mortgage payments this... More about these options, see your car you money in the run. Than the amount of the can you keep your car in chapter 7 7 were able to negotiate better Terms for all... Site are paid attorney advertising the advertisement house after a Chapter 7 bankruptcy is a motor vehicle exemption that help... Be sold off tax refunds will need to know if they can keep their.! Vast majority of our readers ( 87 % ) who filed under Chapter 7 bankruptcy may.. These options, see your car or your home depends on many factors such as if owe! Or truck debts for which you are behind on car payments, your payment and to...