Can I File for Bankruptcy and Keep My Car?
If you’re considering filing for bankruptcy, you may be wondering “can I keep my car if I file for bankruptcy?” The good news is, it’s actually rare that you will lose your primary vehicle in a bankruptcy. The bankruptcy system is set up to allow debtors to keep their car — as long as they meet certain criteria.
Keeping Your Car in Bankruptcy: Automatic Stays
When you file a Chapter 7 or Chapter 13 bankruptcy, an Automatic Stay goes into place. The Automatic Stay will prohibit creditors from collecting money and repossessing property. It will also stop other creditor actions like wage garnishment, foreclosure, or collection calls. The Automatic Stay should prevent a creditor from trying to repossess your vehicle.
Keeping Your Car in Bankruptcy: Asset Exemption
When you file a bankruptcy petition, you are proclaiming that you have debts that you’re unable to pay. Bankruptcy law helps wipe your slate clean of debt – but there are some possessions that are not protected in bankruptcy. These are called non-exempt assets and include property with equity that exceeds the available bankruptcy exemption. Examples include luxury items such as expensive jewelry, valuable artwork or collections, vacation homes, or recreational vehicles. In a Chapter 7 bankruptcy, non-exempt items may need to be surrendered to a Trustee who may sell the property to pay your creditors. When it comes time to address which assets you need to keep and which ones you cannot afford.
Alternatively, exempt assets are typically protected under bankruptcy law. These are assets with equity that does not exceed the available bankruptcy exemption. Georgia law includes a $5,000 motor vehicle exemption, for instance. This exemption applies to the vehicle’s equity, not to its sales price or fair market value. Vehicle equity, also known as retail replacement value or actual cash value, is linked to the vehicle’s year, make, mileage, and condition.
If your vehicle’s equity amount is more than $5,000, you may be able to use Georgia’s wildcard exemption to cover the remaining equity. Georgia’s wildcard exemption is $1,200, which can be used on any property you own, except your home. You could also apply any unused portion of your homestead exemption (up to $10,000). If the vehicle in question is owned by the debtor and one other non-filing person, the debtor will only be responsible for ½ the equity of the vehicle.
Keeping Your Car in Bankruptcy: Chapter 7 and Chapter 13 Bankruptcies
A Chapter 7 bankruptcy case is intended to give you a fresh start by discharging unsecured debts such as credit card bills, medical bills, unsecured loans, balances from broken leases, and personal loans.
The US Congress has determined that there are exemptions we can use to protect certain assets – one of them being your primary vehicle for transportation. We can use these exemptions to protect a certain amount of equity that you might have in your vehicle.
If you have a car loan in place and you are current on your payments when you file for a Chapter 7 bankruptcy, you will usually be able to keep your vehicle and just continue making payments on it.
If you decide to file a Chapter 13 bankruptcy, you can restructure the debt on your vehicle and can make payments through a Chapter 13 bankruptcy plan. A Chapter 13 bankruptcy allows income-receiving individuals to pay off debts systematically and under court supervision. Many debts under Chapter 13 bankruptcy are reorganized and can be repaid over a three-to-five-year period. With a Chapter 13, you may be able to lower the interest rate and/or principal amounts owed on your vehicle.
Have Additional Questions? Call Burrow & Associates’ Bankruptcy Attorneys
Every year, millions of Americans face tough financial circumstances. Filing for bankruptcy can give you a fresh financial start. If you have questions about the bankruptcy process or would like to schedule a consultation, please reach out to us today at (678) 323-2394 or our online contact page. Burrow & Associates will file your bankruptcy case for no money down.
