Due to the potential loss of your home, your car, and all of your assets, bankruptcy can be tough on your family. When you file for Chapter 7 bankruptcy, you have to accept that, along with losing your debt, you will lose all nonexempt equity. In other words, you lose everything valuable. With a little effort, you may hold on to a few assets, such as your beloved automobile.
In order to keep your car, you have to adhere to a few rules when filing. Here are four tips that will improve the odds of keeping your ride even when filing for Chapter 7 bankruptcy:
1. Keep up with your car payments. If you are behind on your car payments, you’ll lose the vehicle. Even if the car is exempt, you won’t be able to keep it. Assuming that you have kept up with your payments, you may be able to redeem your car by paying the lender off. Of course, to do so, you need to have a lump sum of money, which makes this an unlikely scenario.
2. You may be able to reaffirm the debt by creating a new agreement with your lender. To do this, of course, you have to collaborate with your lender, and he or she needs to sign and agree to the new terms. It’s risky though, because if you default on the new loan terms, you could end up liable for the deficiency balance.
3. Use the automobile exemption. You can keep your car as long as the value doesn’t exceed the allowed vehicle exemption amount. This amount varies from state to state. If you have an inexpensive car, you’ll most likely be able to keep it.
4. If possible, hire a lawyer. Bankruptcy is difficult to navigate, and an attorney can help you figure out how to keep particular assets, such as your automobile. For example, you may be able to claim a “wildcard exemption” to keep your car when going bankrupt.
But there are instances when losing your car is inevitable, no matter what you do. As noted, if the value of your car is above the applicable motor vehicle exemption amount, you probably won’t be able to keep it. If you own a luxury car, or if you have a lot of equity in your vehicle, it will most likely exceed the allowed amount. So, the official receiver may seize your car, despite your efforts. On the other hand, remember that part of what makes bankruptcy appealing is that it offers a new beginning. Perhaps it would be a very good time to buy a bicycle!
