Keeping Your Car in a Bankruptcy Case
Filing for bankruptcy can simplify your life by making your eligible debts disappear quickly, as in a chapter 7 case, or by combining them into one monthly payment, as in a chapter 13 bankruptcy filing. It can also make life more complicated, and not only because it stays on your credit report for a long time and makes it necessary for you to rebuild your creditworthiness slowly. If you file for chapter 7 bankruptcy, which is your only realistic option if you do not have substantial income from employment, the court has the right to liquidate your non-exempt assets and use the money to pay your debts. Deciding which assets are exempt is one of the most challenging parts of a chapter 7 bankruptcy case, and figuring out whether you can keep your car after filing for chapter 7 bankruptcy is not simple. For help organizing your finances so that you can file for bankruptcy without risking losing your car, contact a Jupiter chapter 7 bankruptcy lawyer.
Filing for Chapter 7 Bankruptcy When You Own Your Car Outright
Whether you can keep your car in a chapter 7 bankruptcy case depends on the value of your car. In Florida, the motor vehicle exemption is $5,000. This means that, if your car has a resale value of $5,000 or less, it is exempt from liquidation, and you can keep it. Car loan terms are so long, and cars depreciate in value so quickly that if you own your car outright, its resale value is probably less than $5,000. Therefore, it is probably exempt from liquidation. If its value is higher, you may be able to add the wildcard exemption to the motor vehicle exemption.
Filing for Chapter 7 Bankruptcy When You Are Financing Your Car
If you still owe money on your car loan, then the deciding factor is whether your amount of equity in the car is less than $5,000. Car loan payments are front-loaded with interest, so unless you have been making payments on your car for several years, your amount of equity is probably less than $5,000.
Your Car and Chapter 13 Bankruptcy Cases
If you can’t keep up with the payments on your debts but also can’t bear to part with your expensive new ride, chapter 13 bankruptcy is your best option. In a chapter 13 case, the court assesses your financial situation, determines a settlement amount with your creditors, and orders you to pay that amount in monthly installments over the course of three to five years. There is almost no risk of the court liquidating your car or any other assets in a chapter 13 case; that can only happen if you fail to keep up with the chapter 13 plan and the court converts your case to chapter 7.
Work With a Debt Lawyer About Cars and Bankruptcy
A South Florida debt lawyer can help you keep your car after filing for bankruptcy. Contact Nowack & Olson, PLLC in Jupiter, Florida to discuss your case.
Source:
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