Cars and Bankruptcy: Keep it or Let it Go?

When you file for bankruptcy, the thought of losing everything you own can be terrifying. Your car takes you to and from work, gets your kids to school, and holds your groceries. Cars and bankruptcy have long been a point of concern for those filing for bankruptcy. Fortunately, there are some great options that can allow you to keep your vehicle after you file for bankruptcy.

Options During Bankruptcy

There are four options for dealing with a vehicle and/ or vehicle debt during bankruptcy.

1. Own Your Car: If you have no vehicle debt, you may be permitted to keep your vehicle.
2. Reaffirmation: You will continue to make payments to your creditor. If you purchased your vehicle less than 910 days prior to filing, you will repay your loan with a lower interest rate. If your car was purchased more than 910 days prior to filing, you will be required to pay the current value of the car.
3. Redemption: You can redeem your vehicle loan with a new lender for the car's current value rather than the previously owed amount.
4. Give Up Your Car: Your car will be handed over to your creditor for resale.

Choosing The Best Option

It is important to weigh the pros and cons of each option before deciding which route to take regarding your car. If you do lose your vehicle during bankruptcy proceedings, it is possible to get a low-cost, reliable vehicle after your case is closed.

• Ownership: If you can pay off your debt, this is a great option. However, your vehicle can be seized as an asset if you have substantial debt to repay.
• Reaffirmation or Redemption: You can reduce your debt significantly with these options. Your post-bankruptcy payments will be reported to credit agencies. These options give you the opportunity to rebuild your credit.
• Give Up Your Car: If you hand your car over to your creditor, they will resell the vehicle and apply the sale to your debt. The difference will often be dismissed by the bankruptcy court. This is an excellent option if you choose to eliminate your debt altogether.

Speak With A Bankruptcy Lawyer About Your Car

If you are concerned about your car and bankruptcy's effect on your vehicle ownership, talk to a bankruptcy lawyer. They can help you determine which option is best for you and your particular bankruptcy case.