How to Keep Your Car When Filing For Bankruptcy
It is definitely possible to keep your car when you file for bankruptcy. If you need help with your bankruptcy, you can count on DoNotPay to help you do it right.
In these unprecedented times, many of us will find ourselves buried in debt and there is no clear path to how to resolve it all. For many people, it is just a matter of time before they are back on top. Others will need to file for bankruptcy and receive a fresh financial start to get themselves in a position to move forward.
While your credit will take a hit for some time following your bankruptcy, it too can ultimately recover from the situation in time. You might even be surprised how soon you can start to rebuild your credit following a bankruptcy proceeding.
When people imagine what bankruptcy looks like, they may picture themselves losing everything. It is true that you may have to part with some things, but you really won't have to lose everything. In most cases, it is possible for you to keep your car. The bankruptcy courts make certain allowances for you in terms of household furnishings and other personal property as long as it is not too valuable. You will have options regarding your car, no matter what type of bankruptcy you decide is best for you.
When you start the bankruptcy process, you stop all collection activities and your creditors can no longer harass you. You can, at least temporarily, stop a foreclosure or eviction, and your wage garnishments will cease. Bankruptcy might not be for everyone. There are some debts that cannot be resolved in a bankruptcy case, such as child support arrearages, mortgages, and student loans. Some of your creditors might even fight you during the bankruptcy process. If you are having trouble filing or deciding on your next steps, there is help available.
What Is Bankruptcy?
Bankruptcy gives 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.
The table below explores two common types of bankruptcy, Chapters 7 and 13.
|Chapter 7 Bankruptcy||Personal Ch 7 bankruptcy is an opportunity to have your debt discharged so that you can get a fresh start on your life.
During the process of a Ch 7 bankruptcy, your assets of value will be liquidated with the proceeds paid to your creditors. Once you file with the court, the court will assign a trustee to oversee your case.
The trustee will tell you which property you can keep and what you will be required to sell. This type of bankruptcy does not offer you a way to catch up on any payments that you might have missed on your mortgage or car loan.
They will allow you to retain basic possessions, but anything of substantial value will need to be sold.
|Chapter 13 Bankruptcy||Ch 13 bankruptcy will also give you the fresh financial start you need. However, this type of bankruptcy is handled far differently from a Ch 7 bankruptcy.
With a Ch 13 bankruptcy, your debt is restructured and you have the opportunity to catch up on your bills, keep your home, and keep your car.
You will be required to make monthly payments to the courts for three to five years, and you will need to pay back a portion of any unsecured debt you may have. Once the time set by the court is up, the remainder of your debt is discharged.
How to Keep Your Car During Bankruptcy
The manner in which you can keep your car will depend on the type of bankruptcy you have qualified for.
Ch 7 Bankruptcy
Local bankruptcy laws will tell you how much of an exemption you will have regarding the value of your car. As long as you are current on your car payments, and if you are not, you will need to determine the amount of equity you have in your vehicle. To determine this, find out the value of your car and subtract the amount you still owe on your loan. The total from this simple equation will tell you how much equity you have in your vehicle. If the equity in your car is less than the exemption limit for your state, you can keep your car. If, however, the equity in your car is in excess of the exemption limit, there are three things that can happen:
- The court trustee can sell your car and give you the exempted amount to find a new one. In some cases, you may be given the opportunity to reaffirm your car loan so that you can modify the loan and get back in good standing with that creditor. You might also be able to keep your car by paying off the remainder of the loan in a lump sum.
- If you are delinquent in your car payments, the lender can repossess your vehicle as an exemption does not protect your car if you are in arrears with your payments.
- You can surrender your car to your lender. This will remove any responsibility you would have had towards the car loan following the bankruptcy. Unfortunately, a surrender resembles a repossession in terms of your credit report.
Ch 13 Bankruptcy
With a Ch 13 bankruptcy, your car loan and your other debts are restructured and you enter a three-to-five-year repayment plan with the courts.
- You will have the opportunity to get caught up on your car loan if you qualify for a repayment plan.
- Since this is part of the bankruptcy, there is a chance that the amount that you owe on your car may be reduced should it be found that the value of your car exceeds the amount that you owe your lender.
- Just as with Ch 7, you do have the option of surrendering the vehicle and taking the negative hit to your credit report.
How Long Does the Bankruptcy Process Take?
That depends. Ch 7 bankruptcy takes a total of 3-4 months. Ch 13 bankruptcy takes a total of 3-5 years.
What Documents Do I Need to File for Bankruptcy?
You’ll need a lot of paperwork to file for bankruptcy. Start with:
- Tax returns
- Pay stubs
- Bank statements
- A list of your creditors, how they can be contacted, and how much you owe.
- If you own any property, you will need your mortgage statement and proof of the fair market value of any property you own.
- Your car registration, proof of the value of your vehicle, and proof of insurance.
- Identification in the form of your driver's license
- Proof of unusual expenses you have to pay, such as child support or alimony.
How To File For Bankruptcy
Filing for bankruptcy on your own can be a complex situation. Here is what you will need to do:
- Check the details on your credit report and request any verification of your debts as necessary.
- Gather up your required documentation.
- Find out which type of bankruptcy you qualify for
- Check to see if your income is above or below the state's median income.
- If your income is below the state's median income, you qualify for Ch 7 bankruptcy.
- Add up your allowable expenses, including rent, medical costs, groceries, car expenses such as car payments and insurance, and clothing. What is left over is your disposable income.
- If you have a somewhat higher disposable income as well as earn an amount above the state's median income, you are probably a better fit for Ch 13 bankruptcy.
- Take a credit counseling course.
- Get your bankruptcy forms from the court.
- Make sure you have the right bankruptcy forms.
- Go back to the courthouse and ask for the correct forms.
- Fill out your bankruptcy forms in detail.
- Find out what the filing fee is to file for bankruptcy.
- Take deep breaths when you realize that you don't have the filing fee.
- Wait until your next payday.
- Pay the filing fee to the courts and file your forms.
- Wait for the court to appoint a trustee.
- Once you have a trustee, submit your documentation to the trustee.
- Take your court-ordered second credit course.
- Attend your 341 meeting, which is the meeting with your creditors.
- Reaffirm your car loan with the bank within 45 days of your 341 meetings.
- The bank files your signed reaffirmation agreement with the courts.
- Wait for approval from the courts on your reaffirmation loan.
- If you are going for redemption, file a motion with the court to allow you to buy out your auto loan for an amount that is equal to the vehicle's current value.
- Hope that all of your other paperwork was filled out correctly.
- Wait for the courts to either discharge your other debt or deny you the ability to file bankruptcy.
- If you are denied, you can try again using DoNotPay.
What To Do If You Have Difficulty Filing For Bankruptcy
Filing for bankruptcy can be complex, and if you don't do it right, the court can deny you.
If you make mistakes with your bankruptcy filing by leaving information off or doing things that you should not, the bankruptcy courts will deny your application.
If you cannot seem to file for bankruptcy without some assistance, you can either consult with a lawyer, hire a service to handle it for you, or get help from DoNotPay.
DoNotPay has you covered in 5 easy steps:
- Search for File for Bankruptcy on DoNotPay.
- Put together a list of your debts, expenses, and assets. If you need help accessing information like your credit report, DoNotPay can help you get your report.
- 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.
- DoNotPay will then help find the best credit counseling course near you, which you need to complete before filing your bankruptcy forms.
- Lastly, DoNotPay will gather all of the forms you need (including available fee waivers) and help you locate your nearest bankruptcy court. All you have to do is complete the required forms, prepare your filing fee, and file the application with your local court.
And that's it! Once done, the court will give you:
- Your bankruptcy case number
- The name of your bankruptcy trustee
- The date, time, and location of your meeting with your trustee
Just remember to complete the debtors' course.
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