You’ve reached the point where you need to restructure your finances. Whether costly medical bills or a recent divorce have driven you to this point, you fortunately have bankruptcy as a way to reset and start over. But what happens to your car when you file for bankruptcy?
Having a car is important for you. A car can make sure that you get to work. It can drive your kids to school or sports practice. Without it, you must rely on others to drive you. You do have options with bankruptcy to keep your car. These options include:
- Buying out your car – In a Chapter 7 bankruptcy, if your car’s retail value is lower than the amount you owe on it, you can file a motion to redeem. This motion allows you to pay the retail value upfront and keep your car. This is only a good option if you owe much more than the car is worth and can come up with the total amount of money right away.
- Keep paying for your car – With a reaffirmation agreement, you agree with your car lender to not discharge your car loan in Chapter 7 bankruptcy. If the lender agrees, the court doesn’t wipe away the debt of your loan and you get to keep your car. However, you do need to keep making your monthly car payments. If you don’t, the lender can both take your car and ask the court to hold you liable for the rest of the loan.
- File a Chapter 13 – Depending on your specific circumstances, you may choose to file a Chapter 13 bankruptcy instead of a Chapter 7. A Chapter 13 bankruptcy restructures your debt into a repayment plan. This allows you to keep paying your car loan and keep your car.
While these are a few options you have available, your specific situation will determine what works best for you. An attorney can help you look at your finances and decide on the best route for you.
Bankruptcy is meant to give you financial relief and help you start over. This may mean giving up some of your assets to help pay creditors. But just because you file for bankruptcy doesn’t mean that you have to give up your car.