If you are facing bankruptcy auto loan and credit card debt may be major problems for you and you may be wondering what will happen next, what debts will be discharged by the bankruptcy, and what you will still be held liable for. Two main debts that drive most people to bankruptcy are auto loans and credit card debts, as they are typically some of the highest dollar monthly payments. When filing bankruptcy, credit card and auto loan debt may or may not be able to be discharged. It’s important to know what your debt liabilities will be based on the type of bankruptcy that you file.
Filing Bankruptcy: Auto Loan and Credit Card Debt
If you are simply behind on certain payments and wish to restructure the debt while keeping your existing assets, then a chapter 13 bankruptcy may be best for you. In a chapter 13 bankruptcy, your assets are protected while the court appointed trustee structures a payment plan that allows you to pay back most of your debts over a three to five year period. You will be allowed to keep your car, and you will still make your auto loan payments. Your credit card debt may be reduced, but it will not be completely discharged in a chapter 13 bankruptcy. You will also be able to keep your home and other assets and will not have to have them liquidated by the court.
When filing bankruptcy, credit card and auto loan debt may be completely eliminated or discharged by a Chapter 7 bankruptcy. The problem with this type of bankruptcy is that your assets, often including your car and your home, are taken by the court and sold off to produce as much income as possible, which is then distributed to your creditors, after which time the remaining debt may or may not be discharged. Credit card and auto loan debt is most often discharged during a Chapter 7 bankruptcy, unless you specifically took out the credit card debt, or signed for the auto loan with the intent of declaring bankruptcy and with no intention of ever paying for the items. You will not be able to keep your car in a chapter 7 bankruptcy situation in most cases, and you may lose your house- although some home equity is exempt.
Getting Legal Help
If you are filing bankruptcy, auto loan and credit card debt may be the reason that you are filing, or they may just be a symptom of your overall financial situation. The type of bankruptcy that you file will determine how these two different types of debt are handled, and what will become of your possessions. You should speak with an experienced family law attorney for specific information on filing bankruptcy, credit card and auto loan debt, and dischargeable debts.
