The use of
your vehicle is likely an incredibly important part of your life. It provides
you with transportation to get to work and make a living. It is very likely
that you rely heavily on your vehicle to complete your regular operations, whether
you need it to run errands or get to work. It can be devastating and incredibly
disruptive to your life when you suddenly lose your vehicle and have to
scramble to find another way to get to work. Due to the importance of your
vehicle in your life, it is important to understand how a bankruptcy will
impact the possession
of your vehicle. This will help you to make the best possible decision for
your specific situation.
Whenever you have any questions regarding filing for bankruptcy, you should consult with a bankruptcy lawyer, like our professional team at LeBaron & Jensen. This will help to ensure that you have all of the information that you need when you consider the bankruptcy in Utah process. This consultation can also help you to understand what debts are dischargeable through bankruptcy, as well as who is eligible. This can also help you to understand the distribution of other assets. Bankruptcy in Utah can be an incredibly complex process, so it is important to ensure that you obtain the guidance of an experienced professional.
Various Bankruptcy Types
Ultimately, the
ability to keep your vehicle will depend primarily on the type of bankruptcy
that you file for. In general, individuals usually only file for either a
chapter 7 or chapter 13 bankruptcy. Each bankruptcy has an array of
considerations and will impact your life in different ways. Understanding the ins
and outs of each bankruptcy type can ensure that you make the ideal decision
for your specific situation. If you are unsure which bankruptcy will be best
for you, it is crucial to consult with an expert. It tends to be easier to keep
your vehicle in a chapter 13 bankruptcy than a chapter 7 bankruptcy, though
there are still a few ways in which you may be able to keep your vehicle after
filing for a chapter 7 bankruptcy.
Chapter 7 Bankruptcy
During a
chapter 7 bankruptcy, most debts are discharged in exchange for the individual
giving up their nonexempt property. The nonexempt property is sold by the
bankruptcy trustee, and the funds are used in order to repay the debts that the
filing individual has. Any remaining debt is typically discharged after the
property has been sold. Due to the way a chapter 7 bankruptcy works, it may be
necessary for the individual to surrender their car. However, this depends on
the specific vehicle exemption laws present in the state.
Car Exemption Amount
Every state
allows an exemption amount for certain kinds of property. This allows an
individual to keep this certain type of property up to a certain monetary
limit. The total amount will vary between states. It may be as little as $500
for a vehicle exemption or several thousand dollars for the vehicle exemption.
Whether your car will count as an exempt possession will depend on its value in
relation to the vehicle exemption amount in your state. If your vehicle is
worth far more than the exempt amount, it is likely that you will be required
to surrender your vehicle. In this situation, the car will be sold, and you
will receive the exempt portion of the profits. The rest of the money from the sale
will be distributed in order to repay other debts.
Current on Car Payments
During a
chapter 7 bankruptcy, you will have to be current on car payments in order to
keep your car as an exempt property. If you are behind on your car payments, it
is very likely that you will lose the car. There are a few ways that you may be
able to prevent this from happening. You will need to take care of the
arrearage and ensure that your car payment is completely up to date. After this
point, there are two possible options that may allow you to keep your vehicle.
You may be able to “redeem the property” which essentially means paying the
full value of the property in order to keep it. This will involve repaying all
of the debt related to the vehicle, which is often difficult, especially for
someone currently going through a bankruptcy.
The other
option for keeping a car that you still owe money on with a chapter 7
bankruptcy is by “reaffirming the debt.” During this process, you will be
required to sign for a new repayment plan with the seller. This can help to
provide a new arrangement that will work for both parties. This is largely
based on what will be agreeable to the seller. In most situations, the seller
will want the full amount of the loan, so they will likely work with you
regarding the reaffirmation of the debt.
Chapter 13 Bankruptcy
It is easier
to keep your vehicle during a chapter 13 bankruptcy. This is due to the way
that chapter 13 bankruptcies work. These bankruptcies allow you to keep your
property and pay back your debts. Your debts are paid either in full or through
a designated repayment plan. You must stay current on your car payments in
order to keep your car throughout this process. Chapter 13 bankruptcies tend to
be the least disruptive to your life, because they consolidate debts and allow
you to keep your property.
It is
incredibly important to ensure that you understand the impact that a bankruptcy
will have on your life. It will result in a substantial impact on your credit and
ability to obtain loans for several years following the bankruptcy. Consulting
with a bankruptcy lawyer can help to ensure that you remain protected
throughout the bankruptcy process and can obtain the best possible outcome. To
learn more about obtaining the appropriate legal guidance to help with your
bankruptcy process, contact our experts at LeBaron & Jensen today!