Chapter 7 bankruptcy is the branch that people use when they want forgiveness of their debts. Chapter 7 is the faster branch to use, and it eliminates all the eligible debt a person has. Filing for it might result in losing some of your assets, though. However, you can probably keep your car if you use this chapter. Here are several things to know if you want to keep your car when filing for Chapter 7.
Find Out if You Can Exempt Your Car
When you file for Chapter 7, the trustee can take some assets away from you. They cannot take the exempt property, though. If you can exempt your car, you will get to keep it. Every state has rules related to exemptions, but most allow people to keep their vehicles when filing for Chapter 7. When you meet with a bankruptcy attorney about filing, ask about this issue. The attorney will tell you if you can or cannot keep it. To find out if you can keep it, the lawyer might ask you a few questions.
You Must Meet the Requirements
Your attorney will likely need to know two primary things before providing an answer to you. First, how much equity does your car have? If you own a valuable car without a loan, you might not be able to exempt it. Instead, the court will take the car and sell it. Courts do this to pay the creditors in a Chapter 7 case.
The second thing they will ask is if you are current on the payments. If you are not current on the payments, you will need to pay your past-due balance before deciding to keep it. You cannot keep the car if you are behind on the payments. Your attorney might also suggest contacting your lender to let them know your wishes.
You Will Need to Reaffirm the Loan
If you decide to keep your car when filing, your attorney will file a form with your lender. The form is called a reaffirmation statement. This form tells your lender several things:
- That you are filing for Chapter 7
- That you want to keep the car
- That you agree to continue paying the loan as agreed
Your lender must sign this form and mail it back to the court.
When you follow these steps, you might be able to keep your car in a Chapter 7 case. To learn more, talk to a chapter 7 bankruptcy attorney in your town.
