One of the most common concerns about filing for bankruptcy is the potential for the loss of significant assets like vehicles. Every filer’s situation is unique, and so you should consult a bankruptcy lawyer about your concerns. However, most filers are pleasantly surprised to discover that they do have a few options for keeping their cars.
Using Your Bankruptcy Exemptions
Bankruptcy filers can use exemptions to protect some of their assets. Your lawyer will let you know the exact amount of equity that’s protected in your vehicle. Your bankruptcy petition will include the exact and current fair market value of your vehicle. If you don’t owe anything on your car, then the amount of equity you own is the fair market value. If you do still owe, then your equity is the difference between the fair market value and the balance owed. If the state’s motor vehicle exemption is equal to or greater than your equity, then your car is automatically protected and cannot be sold.
Catching Up on Vehicle Payments
The situation is a little trickier if you’re behind on your car payments. Consult your bankruptcy lawyer to determine the best course of action. If it’s feasible for you to get current on your payments, then you could do this before you file for bankruptcy. Otherwise, it’s possible for the lender to repossess the car, whether or not you can protect your equity in it.
Reaffirming the Car Loan
Another possible option for bankruptcy filers who are behind on car payments is to reaffirm the car loan. A court-approved reaffirmation agreement is your acknowledgement that you will pay off the car loan in whole or in part, even if it otherwise would have been discharged in the bankruptcy.
If you decide to straighten out your finances by filing for bankruptcy, an attorney at the law firm of Cutler & Associates, Ltd. will guide you step by step through the process. Our knowledgeable team has been serving families in the Chicagoland area since 1990. Call us at (847) 961-4572 to request a meeting at our office in Schaumburg.