How Filing for Bankruptcy Affects your Car

Once you've contacted bankruptcy lawyers in Memphis, TN, you may be worried that you will need to give a judge all of your items or sell all of your property in order to file. In fact, the federal bankruptcy code is set up in such a way that you are allowed to keep many items that are found to be reasonable and necessary for the maintenance and support of the people that file. In every instance, this includes at least one vehicle. Although you are allowed to keep a vehicle, the impact that filing bankruptcy has on a vehicle depends on the type of vehicle you own. 

Own a Vehicle without a Loan

If you own a vehicle without a loan, you are allowed to keep the car if the value of the vehicle is less than the exemption amount enacted by your state legislature. The amount you are allowed to exempt is anywhere between $2,000.00 and $20,000.00 depending on your state. So, if you have a car worth $5,000.00, and your state allows you to claim a vehicle exemption of $5,000.00, you are allowed to keep your car even if you do not have a loan against it.  You should talk to an attorney about what type of bankruptcy is best for you if you own your car outright, as the chapter you file under will effect what happens as well. If your car is worth more than the amount you can claim under you state's exemption, then you either turn your car in to be sold (and receive some money back) or you can pay your trustee the difference between the exempted amount and the value of your car. 

Own a Vehicle with a Loan

If your vehicle has a car loan on it, you can almost always keep the car when filing bankruptcy. Typically under either bankruptcy chapter, you can keep a car that has a loan against it. The bankruptcy judge simply allows you to continue making car payments during your bankruptcy. The only time you cannot keep your vehicle that is secured by a loan during a bankruptcy would be if the creditor your bought your car from convinces a bankruptcy judge that you should be required to surrender your vehicle. In nearly every situation as long as you stay current on your payments before and after your file, you will be allowed to keep a car that has a loan against it. If you have multiple car loans, what happens to the car varies from state to state, and may depend more on what the judge says. Make sure you talk to your attorney about any vehicles you own before filing, to ensure the type of case you file meets your needs. 

If You Have a Lease Payment 

If you are leasing a vehicle, it is best to stay current on the payments before and after you file your case. You have the option at the time of filing your case to assume the lease or reject the lease agreement. If you assume the lease, you continue to make payments and your car should be safe. If you reject the lease, you are no longer obligated on the lease and you will need to return the vehicle. Turning in a vehicle when you file bankruptcy releases your obligation on the car, and you can typically qualify for another loan or lease within a few months of finishing your Chapter 7 bankruptcy case. A lease can become complicated during a bankruptcy, so make sure you discuss your intentions with your bankruptcy lawyers in Memphis, TN, before making a decision. 

Source : articlesbase.com