When a Chapter 7 case is filed, a Bankruptcy Estate is created and any vehicles you have an interest in become part of this Estate. The following options are then available depending upon your interest in the vehicle(s):
VEHICLE PAID IN FULL, NO LIENHOLDER:
If you own your vehicle free and clear, in almost every case the vehicle is claimed as exempt and abandoned by the Bankruptcy Trustee. You get to keep your car without Bankruptcy interference. While there are some exceptions where there may not be enough exemptions to protect the vehicle subjecting it to liquidation, Doan Law can usually reach a settlement with the Bankruptcy Trustee. However, this is extremely rare and this potential risk would be thoroughly explained prior to filing your case. Again, in almost all cases the vehicle is completely protected and you get to keep it without any impact from the Bankruptcy.
VEHICLE IS UPSIDE DOWN WITH TOO MUCH DEBT OWED:
If you owe much more on your vehicle than what it is worth, you will most likely be advised to surrender the vehicle in the Bankruptcy. In most cases it simply makes no sense to retain a vehicle with debt in excess of the vehicle. Doan Law will handle the surrender from start to finish to make it as easy as possible for you. Most Debtors can then qualify to purchase a new vehicle with Bankruptcy Financing as soon as they receive a case number the date their case is filed. More information on Bankruptcy Auto Financing can be found here. In some cases, a 722 Redemption might make sense where you would pay the retail value of the vehicle to redeem it irrespective of how much you owe. Bankrutpcy financing also exists for this option and may make sense for individuals that really love their vehicle(s) but do not want to pay the entire lien in doing so. To further explore this option, click here.
VEHICLE HAS EQUITY BUT SOME DEBT OWED:
If you owe less than the value of the vehicle, then it usually makes sense to keep the vehicle and either continue with monthly payments or sell the vehicle and recover the net proceeds once the lien is paid. In most cases, you do not need to do anything other than maintain payments for as long as you wish to keep the car. Notwithstanding, you can also change your mind and let the vehicle go at any time in the future without recourse, even years after your Bankruptcy Case is over. Simply contact Doan Law and we will handle the surrender at a later date. Remember, you will have no liability on any deficiency balance even if you surrender the vehicle in the future and you owe more than what it is worth at that time, unless you entered into a reaffirmation agreement. More information on reaffirmation agreements here.
Written by Michael G. Doan– Owner of the Oceanside Bankruptcy office, Michael is a highly skilled Southern California Bankruptcy Attorney Specialist approaching 30 years of experience. Throughout the years he has practiced in numerous fields of law including but not limited to: personal injury, landlord-tenant, workers compensation, insolvency, bankruptcy, consumer rights, debt negotiation, creditor collection abuse, estate planning, contracts, real estate, and tax. Currently, Michael is solely concentrating in Bankruptcy Law and is a Board Certified Specialist in Consumer Bankruptcy Law by the American Board of Certification.