Can I Keep My Car In Bankruptcy?
Posted on October 24, 2012 King and King Bankruptcy Attorneys
With the economy in trouble like it has been for the past
few years, you have probably heard or even know people that have pursued
bankruptcy to ease the financial burden of an underwater mortgage (owing more
on a mortgage than it is actually worth).
A similar question that is becoming more and more common is
whether or not people can use bankruptcy as a release for the financial burden
of an underwater auto loan. While each situation is considered unique and
therefore could provide different outcomes, if you are facing an underwater car
loan there are a few potential bankruptcy options that you can explore with
your bankruptcy attorney.
Chapter 7 Bankruptcies
Chapter 7 bankruptcies provide several options for debt
relief, including some that may allow you to keep your car. As always, your
options will depend on your specific situation. Here are a few options under Chapter
7:
Surrender the vehicle
Surrendering your car is an option to reduce the burden of
auto payments and insurance. However, this is not a viable option for most
people since they need their transportation to get to and from work.
Redeem the loan
Through judicial approval, you may be able to reduce your
car debt to the fair market value. In other words, if your loan balance is
$8,000 and your car is only worth $4,000 you may be able to reduce the balance
of the loan by $4,000. Depending on your situation, your payment requirements
may be either monthly payments or a lump sum payment. There is often a tradeoff
of higher interest charges, so it’s important to run the numbers to see if a
redemption will help you.
Chapter 13 Bankruptcies
In Chapter 13 bankruptcies, your options are different. You
may choose to keep the car and have it rolled into your bankruptcy, where you
will pay some portion–often a fraction–of the balance as part of your payment
plan. If you’ve owned your car for more than two and a half years, you may
qualify to have your outstanding balance adjusted to Fair Market Value and
stretch the payments out over the life of the bankruptcy. In some cases, you
may be able to keep your car and pay off your debt for a very modest monthly
payment.
As you can tell, there are many choices in bankruptcy when
it comes to your auto loan. If you want to keep your car, it’s important to get
expert advice. If you are exploring the possibility of filing for bankruptcy,
schedule a free consultation to learn about your options with an Atlanta , Georgia
