Thursday, January 25, 2018

Keeping Your Car Through Bankruptcy

Will I be forced to sell my car if I declare Chapter 7 bankruptcy?

You likely rely on your car for transportation on a daily basis.  If you are considering filing for bankruptcy, one of your main concerns may be whether you will be able to keep your vehicle after bankruptcy.  The future of your car will depend on several factors, including whether you owe money on the car and whether you can afford to keep it.  Our Ohio Chapter 7 bankruptcy attorneys discuss your potential options for keeping your car through bankruptcy below.

If You Do Not Have a Car Loan

If you own your car free and clear, then the value of your vehicle will become property of the bankruptcy estate.  Assets of the estate will be sold to go towards your creditors, but exemptions do exist.  Federal and state exemptions will protect some of your property from being sold to satisfy creditors.  Under Ohio law, up to $3,675 of equity in your vehicle will be exempt.   As such, you will be able to keep cars valued at or less than this amount.  You can further decide to apply all or part of the so-called “wild card exemption” towards your vehicle, which allows you to protect an additional $1,250 in the value of your vehicle.  

Vehicles valued at substantially over the state and federal exemptions will likely be sold by the bankruptcy trustee to pay off your debts.  If you have a valuable vehicle that you do not want to lose in bankruptcy, you may wish to consider a Chapter 13 bankruptcy.  In a Chapter 13 bankruptcy, you essentially reorganize your debts into a longer term repayment plan.  This type of bankruptcy may allow you to keep your vehicle.

If You Have a Car Loan

Filers that have a vehicle with a car loan may be able to reaffirm the loan in order to keep the vehicle.  By reaffirming, you will sign a contact agreeing with the loan holder to continue to pay off the debt.  You should only reaffirm your car loan if you know you will be able to keep up with payments.  Your second option is to redeem the car by paying the loan holder the market value of the vehicle.  The loan holder must agree to the value.  Contact your bankruptcy lawyer for more information as to how to keep your vehicle in a bankruptcy action.

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