Will I Lose My Car in Bankruptcy?

While every case is different, it is possible to keep your car if you file for bankruptcy under the terms of either Chapter 7 or Chapter 13. If you file for bankruptcy under Chapter 7, with few exceptions your unsecured debt will be discharged. However, the court may liquidate a portion of your personal property in order to pay back some or all of what you owe creditors. Your car is considered personal property and may be subject to administration by the Bankruptcy Trustee for the benefit of the unsecured creditors. Whether or not your car is forfeited as a result of the bankruptcy process will depend on whether you have any equity in the car (difference in value minus what you owe on it), what exemptions are available to you under the Bankruptcy Code and if you can continue making scheduled payments on your car.

There is a greater chance you will be able to keep your car if you file for bankruptcy under the terms of Chapter 13. Since Chapter 13 reorganizes your debt, past due and subsequent regular car payments can be integrated into your repayment plan. Again, assuming you can continue making regular car payments and your car is not considered a luxury item, you should be able to keep your car.

If you have questions about filing for Chapter 7 or Chapter 13 bankruptcy, contact the law office of James H. Monroe, P.A. today to schedule an appointment and learn how we can help you.

Reaffirmation Agreements and Keeping Your Car After Bankruptcy

The 2005 changes to Bankruptcy Code introduced the use of reaffirmation agreements in bankruptcy. Essentially, a reaffirmation agreement is an agreement between a debtor and creditor to re-obligate the debtor on the debt in question. For example, a car dealership, bank or other lending institution will ask the debtor post Chapter 7 bankruptcy to sign a document indicating the amount still owed on his or her car and setting out the other terms of the loan. In essence, a reaffirmation agreement re-obligates the debtor on his or her pre-bankruptcy debt for that particular automobile. While reaffirmation agreements are often used to reassure people they can keep their car after filing for bankruptcy, they expose debtors to post-bankruptcy financial liability.

For instance, if after filing for bankruptcy you are unable to pay off the remaining debt on your car, a reaffirmation agreement entitles a car dealership or bank to repossess your car and sell it. They are then free to collect the remaining difference of the amount owed from you, just as if you had never filed bankruptcy. As such, signing a reaffirmation agreement can work to your financial disadvantage if there is some question as to whether or not you'll be able to pay off your car loan going forward. Additionally, if the value of your debt is greater than the value of your car, signing a reaffirmation agreement may not make good financial sense.

Contact Bankruptcy Lawyer James H. Monroe Today

There are a number of financial and legal issues that must be taken into consideration when filing for bankruptcy or signing a reaffirmation agreement. As your attorney, James H. Monroe advises and counsels you in regard to what is in your financial interest. As a bankruptcy attorney with over 30 years of experience in helping people and businesses file for bankruptcy, Mr. Monroe has the skill and knowledge needed to protect your rights and best interests.

To schedule a free consultation, contact the bankruptcy attorneys at James H. Monroe, P.A. today.