Can You File Bankruptcy And Keep Your House And Car
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The car loan lender has to agree to the terms the court sets for repayment. The aftermath of a Chapter 7 bankruptcy also makes it hard to keep or get a car. If you fall behind on payments, you can’t file again for eight years, so the option of filing bankruptcy to keep your car is gone. The choices are either make the payments on time or lose the car.
First, if you’re close to having it paid off, there is a good chance you have at least a little bit of equity in the car. In this context, equity is calculated by subtracting the current loan balance from the car’s value. As long as the equity is less than the exemption amount , your bankruptcy trustee can’t touch your car. Filing a bankruptcy case is meant to give you a fresh start. Bankruptcy exemptions exist to make sure everyone filing a bankruptcy case can keep their most basic possessions.
How Long Does Chapter 13 Bankruptcy Stay On Your Credit
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Pay and drive is an option that does not legally exist anymore—at least technically.
A Chapter 13 bankruptcy is a debt consolidation program designed to help protect your property and re-establish payments with your creditors if you have fallen behind. The program offers many unique benefits that can actually help you keep your vehicle, improve your payment terms and re-establish your credit. You will have the opportunity to get caught up on your car loan if you qualify for a repayment plan. You'll likely lose your car in Chapter 7 if you can't protect all of the vehicle's equity.
What Is Equity Of The Car Value
Most motor vehicle creditors will require an individual to sign a Reaffirmation Agreement on the vehicle to be filed with the court. Signing this document essentially puts you in the same position with your obligation as before you filed. Reaffirming on a motor vehicle is also a useful tool to begin the process of rebuilding your credit. You can also choose to redeem the car by paying the lender the current market value in one payment. It is important to note that filing for chapter 7 bankruptcy in Florida will not stop the bank from collecting on your home loan if it is past due. If you intend to file for chapter 7 bankruptcy in Florida, you will first need to ensure that you are current on your house payments.
Our attorneys combined as a team have hundreds of years of experience dealing with all kinds of legal cases throughout Richmond, Harrisonburg, and all over Virginia. It is our goal to serve our clients with the utmost integrity, respect, and dignity regardless of your circumstances. DoNotPay will then help find the best credit counseling course near you, which you need to complete before filing your bankruptcy forms. Let DoNotPay walk you through your bankruptcy options and help you determine whether a Chapter 7, Chapter 12, or Chapter 13 bankruptcy is right for you.
Lowering Your Monthly Car Payment With The Help Of A Bankruptcy Attorney
Reaffirm your car loan with the bank within 45 days of your 341 meetings. Just as with Ch 7, you do have the option of surrendering the vehicle and taking the negative hit to your credit report. Bankruptcygives you the financial fresh start you need when you are overwhelmed by debt and have no other way of catching up on all your bills. If you answer yes to the first question and don't have a car payment, Chapter 7 will meet your needs . Here are some examples that show how equity and exemptions are applied in Chapter 7 and Chapter 13 cases. Debt.org wants to help those in debt understand their finances and equip themselves with the tools to manage debt.
Most of the time the plan will say that you will just pay the loan directly to the lender yourself as you did before. About the only time you wouldn’t pay directly would be in a cram down situation, which I’ll explain later. A reaffirmation agreement is a contract that reinstates a debt as if the bankruptcy never happened. You have to look at them closely, however, because sometimes they change the original terms. They have to be filed with the court before the date of discharge.
It depends on the chapter of bankruptcy, the status of the house and car loans, and your current financial situation. Both types of bankruptcy make it easier to keep a car than your home. However, if you are up to date with your mortgage payments, you’ll have an easier time saving your home. As with cars, bankruptcy trustees cannot take your home in a Chapter 13 filing. If you are short on a mortgage payment but want to keep your house, your repayment plan will have to include the nonexempt equity of your home and the mortgage payments.
Although you would get a payment from the trustee, you would lose your vehicle. Contact your car lender if you wish to pursue a reaffirmation agreement. It must be approved by the bankruptcy court, and they generally won't approve it if the lender does not reduce the interest rate or principal balance of the loan.
The bankruptcy court will hold a reaffirmation hearing to determine if you can afford to make the car payments. If you are still making payments on your car loan when you file for bankruptcy, then the equity you have in the car becomes important. Equity is what you still owe on the car subtracted from its current value.
The amount that you will pay creditors, however, depends on the amount of property that can be exempt through exemptions in the state of Virginia. Under Virginia law, filers have up to $6,000 in equity for their motor vehicles. In a joint case with a married couple, each spouse has up to $6,000 for a car in their name.
Your car will be protected in Chapter 7 bankruptcy filing if its equity is equal to or less than $6,000. Similarly, with a home, if you owe $7,000 on a house that is currently worth $16,000, you have an equity value of $9,000. For instance, if you have a car worth $8,000 at current market value, but you owe $3,000 on it, you have an equity value of $5,000. Chapter 7 filers can maintain their property in cases where the amount of the property equity is either equal to or less than the state exemption amount. Equity in your property is the difference between the current value of the property and how much you owe on it. Read more about the specifics on Virginia state exemptions for motor vehicles and residential property based on each chapter.
It’s going to be a repossession on your credit report, just so you know either situation you do. The vehicle is going to be sold at auction and the deficiency amount, which could be a judgment if you’re sued, is going to be wiped out by the Chapter 7 or the Chapter 13. In a Chapter 13, you’re going to continue to make the house payment but the vehicle payment is going to be through the plan. They’re going to get their money, instead of directly by you, indirectly by the Chapter 13 Trustee.
The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. If you answer no to either of the first two questions, you could lose your car in Chapter 7 and should consider filing for Chapter 13. You have a lot of non-exempt car equity over and above the $12,100 wildcard exemption. The longer you’ve owned the car and the more you’ve paid, the more likely it will be over the exemption limit. On the other hand, cars are not like fine wine — they lose their value fast. Keeping your car after bankruptcy depends on your financial situation.
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