How to Deal with Vehicle When Filing for Bankruptcy Under Chapter 7?

People are worried about when filing for Bankruptcy Protection under Chapter 7 how does this affects their ability to keep their assets. Assets like a car or a house. Most occasions people who file bankruptcy just is seeking to get rid of their car like; it has high mileage, and/or it is in poor condition and has a lien higher than its fair market value. It is a lemon that needed to get rid of. Those cases are very easy to deal with. If you file a bankruptcy protection, you are seeking to get rid of your vehicle, and you have the choice to surrender the vehicle to the lender.

Most client is seeking to keep their vehicle during and after bankruptcy proceeding. In order to keep their vehicle, clients are willing to make payments to the lien holder of their vehicle. When client can use exemptions or if the car does not have any value, the bankruptcy estate will have no reason to sell the car and will most likely pass through the bankruptcy. The client may be able to keep the car as long as the payments are current.

There are three ways to deal with a car in Chapter 7, when dealing with the lien holder. One, the client can get rid of the vehicle by surrendering it to the lien holder. Two, the client can make an agreement to reaffirm it, so the client is still responsible to make payments toward their debts after the client’s bankruptcy proceedings. If the client missed any payments, the creditor is permitted to repossess the vehicle and the creditor can sue for the remaining balance of the lien. Three, the client can redeem the vehicle by order of the court what the client is supposed to pay for its actual value. The issue with this recommendation is that the client must pay a huge lump sum which person has thousands dollars to which someone is contemplating filing bankruptcy. This is probably on one.

Every recommendation stated above have issues associated with this. You do not discharge the debt during the bankruptcy when reaffirming the debt. Even after reaffirming the debt, the client may have to make more payments than what the car’s worth. There are times that the court will enter an order not approving the reaffirmation agreement, but ordering the lien holder not to repossess the vehicle only if the debtor is current on the payments. Of course, there is no guarantee the court will enter this order, but the client may have to attend additional hearings to receive this order. As far as redemption, the client must pay the retail value of the car when the court enters the redemption order. Many clients will not afford to pay the entire amount. Only a few lenders are willing to help with redeeming a vehicle, but if they do, they normally request a high interest rate.

There are an alternative that is not in the books. As long as the debtor is current to make his or her payments on the vehicle, a few lien holders may repossess the car. How this could help the debtor that a person can keep the car and in the future if it no longer work or cost more to repair the car, the debtor may voluntarily give back the car without a reaffirmation and not paying back the balance of the lien. The lien holder who will allow this may change, and it is important that be advised from Bankruptcy Attorney in Maryland before you make any decision to advance your case. You can contact the Soubra Law Firm at 301-219-5038 with regards to your Bankruptcy needs. In the alternative, you can fill out the contract form to reach out to us to discuss your bankruptcy needs. We will be happy to represent you in your bankruptcy needs.