Cars in Chapter 7 Bankruptcy: Can I Keep My Car?

When filing for Chapter 7 bankruptcy, many people worry about losing their cars, but most don’t. If you’re tired of making payments and want to give up your car, you can. But if you want to keep it, you’ll need to prove that you need the car, can afford it, and don’t have too much equity in it.

How to Keep Your Car in Chapter 7 Bankruptcy

Almost everyone needs a car, so proving you need one is easy. But if your car payments are high because you’re driving a luxury vehicle, that might be a problem. Sometimes, people drive cars that are too expensive for their budget.

To keep your car, you need to show that your income can cover the payments. Look at your budget and see if you can afford it.

In Chapter 7 bankruptcy, you can keep up to $3,500 of equity in your car per owner. Depending on other assets you have, you might also qualify for an extra $5,000 of equity. This can be tricky, so feel free to reach out to Cameron Bankruptcy Law for help understanding your specific case.

Automatic Stay for Your Car

When you file for Chapter 7 bankruptcy, an automatic stay kicks in. This legal protection stops creditors from trying to collect money from you. So, your car loan creditor might stop sending you bills or accepting payments for a while. But this doesn’t mean you don’t owe the money. If you want to keep your car, you should still save and make your regular payments.

Some creditors might not accept payments during the bankruptcy process. In that case, save the payment money and pay it when they start accepting it again. Just don’t spend the money!

Car Loans in Chapter 7 Bankruptcy

Some people think they can leave their car loan out of bankruptcy, but you must list all your debts, including your car loan. This doesn’t mean you’ll lose your car—it just ensures that the creditor knows about your bankruptcy case.

If your car creditor asks for a reaffirmation agreement or stops accepting payments, don’t worry. It’s a common part of the process and doesn’t mean you’ll lose your car.

Reaffirming a Car Loan in Chapter 7

When you file for bankruptcy, your obligation to pay debts gets wiped out, even secured debts like a car loan. But, if you want to keep your car and keep making payments, you can sign a reaffirmation agreement, which means you’ll continue being responsible for the loan even after bankruptcy.

In the Eastern District of NC, your attorney can help adjust the reaffirmation agreement so you can keep your car without personally owing the debt. The downside? Your payments won’t be reported to credit bureaus. But the upside is, if you can’t keep making payments, the creditor can’t sue you for the leftover balance.

Buying a Car Before Filing Chapter 7

It’s usually not a good idea to buy a car right before filing for Chapter 7 bankruptcy. If you buy a car within 90 days before filing, it might be taken during bankruptcy. If you must buy a car, try to make sure it has little to no equity or put it in someone else’s name.

Buying a Car After Filing Chapter 7

You can buy a car right after filing for bankruptcy. But be careful—some companies may try to take advantage of your situation. We recommend contacting Cousin Kera Hansil at AskCousinKera.com or calling (919) 275-5372. She’s honest and will help you get the best deal. Remember, any debt you take on after filing won’t be part of your bankruptcy case.

Redeeming Your Car in Chapter 7

If your car is worth less than what you owe, you can redeem it during bankruptcy. This means you can buy the car for its actual value instead of the full loan amount. This could be a good option if you owe more than your car is worth. The interest rates might be higher, but it’s worth considering. Check out 722Redemption.com to learn more.

Need more help? Cameron Bankruptcy Law is here to guide you through the Chapter 7 process and help you keep your car. Call us today!