Yes, you can keep your car! Or even buy a new one!

People often ask what will happen to their car if they file for bankruptcy. The answer depends on what type of bankruptcy they choose to file, as well as their personal situation.

If a debtor chooses to file for chapter 7, and if there is no lien on the debtor's car, it is likely that the debtor will be able to keep his or her car (however, this depends on the exemptions the debtor has available.)

If there is a lien on the debtor's car, the debtor may be able to keep the car if he or she either reaffirms the debt (in which case the debt isn't discharged), or redeems the vehicle under section 722 of the bankruptcy code. To "redeem" means to buy the vehicle for its fair market value, even if the debt you owe is higher. For example, if your car is worth $10,000, but you owe $20,000 to the lender, you have the right to buy it for $10,000. I can recommend specialized lenders that will even finance the loan for you - subject to approval.

However, if there is a lien on the car and the debtor is behind on payments, the company holding the lien will eventually end up repossessing the car unless either redeem or make arrangements to get current.

In a chapter 13, just as in a chapter 7, if the debtor has no lien on his or her car it is likely that the debtor will be able to keep the car (again, depending on the available exemptions).

However, unlike in chapter 7, in a chapter 13 the debtor can probably keep his or her car even if he or she is behind on payments. What happens in a chapter 13 is that the total amount owed on the car loan will be stretched out over the life of the chapter 13 plan. This usually means that the debtor can pay the remaining loan balance back over a longer period of time (most likely three years or five years, depending on the debtor's situation), reducing the amount the debtor has to pay each month. You can also, redeem a vehicle in chapter 13, subject to certain limitations (typically called a "Cram Down").

Want more info? Please contact me at your earliest convenience to schedule a free consultation to discuss the specifics of your case.
You can also self-schedule an appointment by going here:

http://butwinicklaw.com/index.php/appointments/

Jeffrey H. Butwinick, Esq.
7800 Metro Parkway
Suite 300
Bloomington, MN 55425
[email protected]
www.ButwinickLaw.com
T. 651-210-5055
F. 651-560-7135