What Happens To My Car In Bankruptcy?

If you own a car or lease a car, you will need to decide what happens to your car in bankruptcy. You have the choice to keep your car and the debt associated with it, or you can choose to surrender the car in bankruptcy. This means the car goes back to the lender, and the debt goes with it. There are one or two exceptions, which we will address. In summary, you can either keep the car and the debt, or ‘get rid of’ the car and get rid of (discharge) the debt.

How Can I Keep My Car In Bankruptcy?

If you want to keep the car in a Chapter 7, you will need to be current on payments by the date of your 341 meeting. You will sign a Reaffirmation Agreement with the lender, which will contain the same terms you had prior to the bankruptcy. The reason for the agreement is the filing of your bankruptcy technically relieves you of the obligation to repay the loan; however, if you want to keep the car, you will need to renew the agreement. The Reaffirmation Agreement accomplishes that.

If you want to keep your car in Chapter 13, you can do so. Your interest rate may decrease due to the interest rate set by the bankruptcy court. Additionally, if you have had the vehicle for more than 910 days, you may be able to lower the balance on the loan in Chapter 13, which can be a tremendous benefit.

How Do I Surrender My Car In Bankruptcy?

If you want to surrender the car and the debt, it is easy. We file your bankruptcy and reach out to the car lender to make arrangements for them to pick up the car or have you drop off the car in the alternative.

You Have Options

The upside to addressing a car in bankruptcy is that you have options. Most clients are incredibly happy with the results of bankruptcy including the ability to have flexibility regarding vehicles. The rules of bankruptcy heavily favor the debtor—the person filing—and as a result, if you would like to keep a vehicle while discharging all unsecured debt, it is almost always an option.

Speak With A Bankruptcy Lawyer Today

If you would like to speak with us about what happens to your car in bankruptcy, you can request a free consultation. Just call 704.749.7747 or click HERE to request a time to talk. If you would like to watch a short video from Chris Layton, it may help you make a decision regarding working with us. We know you have choices. We hope you choose Layton Law.

Bankruptcy And Car Loans

This article will help address the concept of bankruptcy and car loans. One of the myths of bankruptcy is that you can’t keep a car when filing a Chapter 7 or Chapter 13. Another myth is that old car loans are not addressed by bankruptcy. There is good news regarding both of these situations.

Protecting The Equity In Your Car

When you file bankruptcy, the primary question you face regarding your car is related to equity. Equity is the difference between the fair market value of your car and the loan balance. If your car is worth $10,000 and you have a loan balance of $7,000, you have $3,000 in equity. Equity is an asset in bankruptcy and you must protect or “exempt” it by using the appropriate bankruptcy code exemption.

Generally, there are two exemptions you can apply to vehicle equity. First, there is a specific exemption under N.C.G.S. Sec. 1C-1601(a)(3). This allows for an exemption of $3,500 in equity in a vehicle. In the analysis above, claiming that exemption would protect your car. If you had additional equity above $3,500, you could also elect to use the Miscellaneous Property “Wild Card” exemption under N.C.G.S. Sec. 1C-1601(a)(2), which gives you another $5,000 to protect any property you like.

Keeping Your Car In Bankruptcy

If you want to keep your car in bankruptcy, after protecting any equity you have, you will then need to reaffirm your car loan. The general rule is if you want to keep the property, you need the keep the loan that comes with it. This is easy to do. When you file your bankruptcy, you simply elect to reaffirm the debt. Your vehicle lender will prepare a reaffirmation agreement at the same terms you currently have. You will sign and file this document as part of your bankruptcy process. As a result, your payments will resume and you can keep your car.

Surrendering Your Car In Bankruptcy

One upside to the analysis of bankruptcy and car loans is that you can also choose to surrender your car. You may choose to do this if you have negative equity or simply know the car needs repairs and you don’t want to keep it. By surrendering the property in bankruptcy, you are protected from your vehicle lender pursuing you for any loss they take on the sale of the vehicle.

Vehicle Repossessions In Bankruptcy

If you have prior vehicle repossessions, bankruptcy will address that lingering debt as well. If you’re filing bankruptcy and old car loans are still showing on your credit report, they will be discharged as part of the bankruptcy. This eliminates your exposure on these items.

Speak With A Charlotte Bankruptcy Attorney

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Can I Keep My Apartment In Chapter 7?

Yes, you can keep your apartment in Chapter 7. You will need to stay current on rent, but you can keep it. In other words, the fact you filed Chapter 7 does not give the landlord the power to evict you. Lastly, Chapter 7 will actually give you the power to get out of your lease if you would like to. This article addresses concerns regarding rental property in Chapter 7.

Should I Keep My Apartment In Chapter 7?

Sometimes, rather than ask “Can I keep my apartment in Chapter 7,” you want to ask “SHOULD I keep my apartment in Chapter 7?” When you’re filing Chapter 7, it’s a good time to reconsider your housing situation. Sometimes the cost of your monthly rent is prohibitive and the only reason you’re still paying it is because you’re afraid of breaking the lease. If that’s the case, Chapter 7 gives you the opportunity to walk away from the contract.  If you do walk away from the apartment contract, any unpaid rents are discharged in bankruptcy. This is called Rejection Of The Lease.

Rejection Of The Lease

Rejecting a lease in Chapter 7 starts by listing the lease on Schedule G. You then simply check the box indicating you would like to reject the lease. This means that you want any unpaid rents treated as unsecured debt, and discharged in the bankruptcy. Keep in mind your security deposit can be held by the landlord to offset unpaid rents; however, the landlord will not be entitled to anything else from you.

Vacating The Premises

You should cooperate with your landlord and vacate the premises if you plan to reject the lease. If you do not vacate the premises in a timely manner, you should expect the landlord to begin official eviction proceedings. Again, this is only if you are rejecting the lease in your bankruptcy filing.

Assumption Of The Lease

If you would like to remain in the apartment or rental unit, you will elect to Assume the lease. This means that you will owe the landlord any back rent, together with ongoing and future rents. Generally, the landlord will present you with a new contract to sign after you file bankruptcy. By signing this new contract, you are re-affirming your agreement with your landlord. Be careful before you do so, as the filing of your bankruptcy is your chance to walk away from the contract if you like.

Renting An Apartment After Bankruptcy

Keep in mind that after you file bankruptcy, you will have it on your credit report. Apartment complexes of course will run a credit check prior to signing a new apartment lease with you. We always ask clients to call us if they have any trouble leasing a new apartment. It is rare that we receive a call. One theory is that so long as you have employment and a security deposit to put down, the new apartment complex is comfortable renting to you. They also know you can’t file bankruptcy because you recently filed. This actually protects the creditor/landlord.

Further Reading

Many of the same rules for apartments apply to keeping a car in bankruptcy. Additionally, if you own a home, you can read about keeping your home in bankruptcy.

Speak With A Charlotte Bankruptcy Lawyer Today

If you have questions about bankruptcy, call us. If you want an answer to the question “Can I keep my apartment in Chapter 7,” we can help. You can reach us at 704.749.7747 or click for a FREE CASE EVALUATION and we will call you back today. We know you have options. We hope you choose to Recover With Us.

Generally, speaking you cannot use your credit card to pay for bankruptcy. The reason behind this is if you use your credit cards too close to filing bankruptcy, there is a presumption of abuse that arises. This presumption of abuse means it is assumed that you incurred debt you knew would be forgiven or discharged by Chapter 7 bankruptcy. By using your credit card to pay for bankruptcy, then filing bankruptcy, it is hard to argue you did not plan to have the cost of bankruptcy discharged. Keep in mind, you cannot keep your credit cards when you file bankruptcy.

Incurring Debt Prior To Bankruptcy

Your lawyer can’t advise you to incur debt prior to filing bankruptcy. If your lawyer accepted a credit card payment for your bankruptcy, this would be the equivalent of advising you or assisting you in incurring debt prior to filing bankruptcy. This violates federal bankruptcy law and your lawyer would experience repercussions as a result. There are a few exceptions, like accepting a credit card payment from a relative for your bankruptcy; however, attorneys have to be very careful when accepting credit card payments in any situation.

Allowable Debt Prior To Filing Bankruptcy

This does not mean you can’t incur any debt prior to bankruptcy. An example would be the purchase of a car before filing bankruptcy. If you take out a loan to buy a car just before bankruptcy, this is allowable. First, a vehicle loan is a secured debt. This means that the lender is secured in the event you file bankruptcy—if you want the debt discharged you would have to give them the vehicle. However, in most cases, when you buy a car before filing bankruptcy, it’s to avoid trying to buy one after bankruptcy hits your credit score and credit report. In that case, after you file the bankruptcy, you simply file a reaffirmation agreement with your attorney’s help. This way, you file bankruptcy, keep the car, and keep the debt associated with the car. The loan terms do not change.

Cash Advances And Bankruptcy Filing Fees

You can potentially take out a cash advance on a credit card to pay your attorney. However, in our opinion, this still qualifies as using your credit card to pay for bankruptcy. Additionally, if you take out more than $925 in the 70 days prior to filing bankruptcy, for any reason, the credit card company can file a lawsuit demanding that those particular funds should not be discharged in bankruptcy.

How Can I Pay My Bankruptcy Fees

Stop Paying Credit Cards — Once you know you’re going to file bankruptcy; you can stop making payments on credit cards which will be discharged in bankruptcy. This may free up some immediate cash flow to pay for your bankruptcy.

Borrow Money From A Friend Or Family Member – It’s ok to borrow money from a friend or family member to file bankruptcy.

Ask About A Payment Plan With Your Attorney – Our firm allows payment plans for filing bankruptcy. Your final payment does need to be made prior to filing the bankruptcy. This allows you to make a small payment up front to hire us, and have us work on your case. Together we will spend as much time as needed preparing for the filing. When you’re ready with your final payment, we will also be ready to file the bankruptcy. This works great for most clients.

Talk To A Charlotte Bankruptcy Attorney Today

If you’re having trouble with finances, and considering bankruptcy, give us a call. You can reach us at 704.749.7747. Or you can click for a FREE BANKRUPTCY CONSULTATION and we’ll call you shortly. A brief phone conversation can change your life and get things going in the right direction. We know you have options. We hope you choose to Recover With Us.