For many people considering bankruptcy, preservation of an ordinary lifestyle as they are accustomed to it is very important. In particular, people worry about how to keep their homes and how to keep the cars they rely on to get to work. The question of what happens with cars and car loans in bankruptcy is therefore of vital interest to most bankruptcy filers.
Too Late for Buyers Remorse
Was it a wise idea to buy a high-dollar car in the first place, even as you struggled with other debts? This type of question is perhaps irrelevant at this point. However, it is a reminder of how aggressive sales agents and car loan lenders often tempt people to push their financial limits inappropriately. Dealers and lenders are not your friends once you drive a new car home.
Nonetheless, the deed is done and now the car and car loan must be considered along with other important aspects of your financial big picture as you approach bankruptcy.
Bankruptcy Laws Recognize the Importance of a Vehicle for Transportation
Both state and federal bankruptcy exemptions include provisions for a debtor to retain ownership of a car. However, auto loans involve liens on the cars that borrowers pay for over time. Auto loans are typically between three to six years in duration. Auto leases are also usually several years long.
Car Loans and Bankruptcy: Consider Your Options
Whether you are paying for ownership of a car or leasing a car as you approach bankruptcy, you should talk to a lawyer as soon as possible to determine the best solution in your case:
- Allow the car loan to be included (and discharged) in Chapter 7 bankruptcy, and expect the lender to repossess the car. Make plans to borrow a car, take public transportation or buy a more inexpensive, used car shortly after your bankruptcy is complete.
- Allow the car loan to be included in the bankruptcy. Give up your car. Be prepared to accept offers of financing that you are likely to receive from car dealers shortly after your bankruptcy is complete. Buy a new car with a new car loan, and rebuild your credit by making payments on time.
- Include the car loan in your Chapter 7 bankruptcy, but immediately after your bankruptcy is complete, reaffirm the loan as requested by the lender, and continue making payments and retain possession of the car as usual.
- Assuming you can keep current with car loan payments, keep your car and include any unpaid arrearage in a Chapter 13 bankruptcy debt reorganization plan, to be repaid over three to five years with little or no interest.
As you can see, there are a variety of solutions allowing you to deal with the car loan as well as your need for transportation when you file bankruptcy. Going the Chapter 13 bankruptcy route may allow you to repay what the car is worth (Blue Book value) rather than repaying the entire balance of the loan as it now stands. A knowledgeable bankruptcy attorney can advise and assist you in making this a viable option.
Auto Loans, Car Leases and Debt Relief: Contact an Attorney for Help Dealing With Secured Debt When Filing Bankruptcy
Talk to an experienced bankruptcy attorney near Poughkeepsie, New York, to schedule a free initial consultation regarding auto loans and bankruptcy or any aspect of debt relief that is of particular concern to you. Call or e-mail the law offices of Genova & Malin, Attorneys at Law.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
