Chapter 7 bankruptcy can give you the fresh start that you deserve when your debts are overwhelming — but many people are very afraid of the process because they’ve heard exaggerated horror stories about what bankruptcy is like.
One of the biggest questions people ask when contemplating a Chapter 7, or “liquidation,” bankruptcy is whether they’ll lose their vehicle in the process. Because of the way that bankruptcy protections work, the vast majority of people who file will not lose their cars — especially if it is their work vehicle or the only car for their family.
Federal and state laws may allow you to exempt your vehicle
Only the equity in your vehicle is considered by the bankruptcy trustee when they review your assets. If (like most people) you owe more on your vehicle than it is worth, then it isn’t considered an asset.
Even if you owe less than your car is worth, however, there are both federal and state exemptions involved in a Chapter 7 bankruptcy that may come into play that will allow you to keep your vehicle — as long as you are current on the payments. If you are behind on the payments on your vehicle, your lender may eventually be able to repossess it, although you may also have the option to catch up on your payments or reaffirm the loan through a modification program that will eventually catch you back up.
If you own a luxury car outright or have several vehicles, then you may be required to turn those assets over to the bankruptcy trustee — but there are still several factors that would have to be considered.
Our website has more on protecting your vehicle and other assets in bankruptcy. Ultimately, you really have nothing to fear from bankruptcy. Please continue reviewing our website to learn more.