Vehicles in Bankruptcy
The exemption for most vehicles in bankruptcy is $5,000.00. If you have more than $5,000.00 in equity in our vehicle, talk to an attorney about your options. Q:What happens if my car is worth less than I owe? The answer to this question depends on what Chapter of bankruptcy you decide to file under. In Chapter 7, you have three options: - Redeem – buy it - Surrender – give it back - Reaffirm – tell the bank you want to keep the terms of your finance contract or negotiate new better terms.
In Chapter 13,, you have different options: - Surrender it - Keep it:
If your finance contract is less than 910 days old and you want to keep it, continue paying for the vehicle over the life of your plan. Cram Down - If the loan is older than 910 days, the loan may be subject to “cram down". This means that your we may be able to file appropriate papers within your Chapter 13 bankruptcy case to modify your loan contract so that all you will need to pay through your Chapter 13 plan is an amount equal to the “value" of the vehicle. Q: How is the value of my car determined? Most states will use either Kelly Blue Book or NADA to value your car, so it is up to you to provide as many details as possible so that a proper valuation may be made. The court typically looks at retail value but will make adjustments for required repairs that would be required to make the car similar to a retail-ready vehicle. Q: I’m behind on my car payments, can I still keep it? It depends. In a Chapter 7, the lender will typically require you to be current on the car loan in order to keep it. In keeping the car, you will be required to sign a reaffirmation agreement, which essentially is you acknowledging that you will remain liable for the debt. Without the reaffirmation, you could stop making payments and all the bank could do is get the car back. In a Chapter 13, you may be able cram down to the value of the car if you have had it long enough. If you have not, you can always make up the missed payments over the life of your Chapter 13 Plan.