If you own a car through an automobile loan and are struggling to keep up with the installment dues, you might want to know what could be in a potential scenario, if you had filed for bankruptcy. In cities like Dallas, Houston, and other cities, where public transport is not exceptional and well connected, the car is more of a necessity than a luxury. Whether it be to run around the grocery errands or to manage the daily routines of work, kid’s school or any other things. People using their own car might find it extremely difficult to sustain without it even in bankruptcy. Hence, it is a pretty obvious concern to what happens to your car in bankruptcy.
Type of bankruptcy to decide
Chapter 13 and Chapter 7 are two bankruptcy category that will determine if you will be able to keep your car or not. In the case of Chapter 13 bankruptcy, the payment plan shall accommodate some payments towards the car loan since it is a secured loan, the chances of retaining the car is high. On the other hand, Chapter 7 rules need the borrower to trade in all the non-exempt assets which could well include your car.
Are there methods to keep the car when applying for Chapter 7 bankruptcy? Yes, there are, let’s learn how in the next piece.
The car worth and affordability are two important things that can decide the car fortunes for you. If you need to keep your car, you shall file a reaffirmation treaty with your car loan lender during the bankruptcy procedure. This reaffirmation treaty is basically an agreement which prevents car loan from being released or discharged. This means you shall continue making car loan installment payments whenever they are due in spite of bankruptcy. Reaffirmation could be allowed by the court if the installment due could be proved as an ‘undue burden’ in the bankruptcy court. Ultimately, all other obligations, income, and various other factors come into play. To analyze all factors and to seek professional help in this regard, log on to Recovery Law Group right now.
Car worth and Equity concepts
If the liquidation is made through Chapter 7 there is a concept of equity that comes into the picture. The difference between the purchase price of the car and the remaining principal due is regarded as equity. During the liquidation process, one can use the exemption codes available in certain states like California and try retaining their assets like a car. In California, there are two exemption codes. The first one allows for a cap of $3,050 on equity as an exemption for your vehicle while the second one caps it to $5,350. Both these elections cannot be applied simultaneously and are individual section codes or systems.
If the equity portion of your car is below the exemption codes of $5,350 or $3,050 the bankrupt trustee cannot liquidate your car for repaying debts. If you exceed the exemption amount, it is still not over. You can pay off the excess amount over the exemption to the trustee to be eligible again. The second and last option is to initiate a reaffirmation treaty which has been discussed earlier. Chapter 13 bankruptcy helps you hold on to the car until you comply with the payment plan set up by you, the court, and creditors and all other complications related to Chapter 7 bankruptcy California. For assistance from the best and experienced bankruptcy lawyers, dial in +1 888-297-6203 now!