Can I Stop My Car Repossession with Bankruptcy?
Chapter 7 bankruptcy is when all non-exempt assets are sold to pay off the creditors. Exempt assets from liquidation are those required to make a living. A craftsman who needs a truck to carry their tools to the work site may be able to prevent a car from being taken, since it is critical to their ability to earn income and thus repay their debts. A single personal vehicle may be kept under Chapter 7 bankruptcy in many cases. A second vehicle might be kept. To keep the car through Chapter 7 bankruptcy even when there is a lien against it, the borrower must reaffirm the debt, make the payments through bankruptcy, and continue making payments after bankruptcy if money is still owed on it.
Filing Chapter 13 stops the repossession if it has not already proceeded. For example, if the car is going to the auction block that weekend, filing for bankruptcy may not stop the repossession or car auction. And it would be too late to stop the lender from sticking you with the deficiency owed after the auction results in less money brought in that was owed against the car.
In Chapter 13 bankruptcy, the borrower gets to negotiate a repayment plan with the creditors. If the auto loan lender accepts a payment under the repayment plan, you get to keep the vehicle. If they do not accept the payment plan, they may be able to repossess the car. Chapter 13 allows car payments for vehicles needed to get to and from work or school to be counted as necessities. In most cases, you also get to keep cars that are already owned debt-free.
It would be advisable to sell second and third vehicles, RVs, 4-wheelers and any non-essential vehicles to raise money to pay down your debts. An RV may be saved if it is your primary residence or if you will sell the house in bankruptcy and make the RV your primary residence. However, you should always discuss these matters with Minneapolis bankruptcy lawyers to prevent problems with your bankruptcy filing.
What happens if you can sell the car to pay off the debt entirely? For example, what if you received a new job that provided a company car or received a small car as a gift from a relative? Speak with a Minnesota bankruptcy attorney to adjust your repayment plan to eliminate the automotive debt from your bankruptcy case.
Do not claim a vehicle as a work vehicle if it is not. This can place your bankruptcy filing in jeopardy and result in it being nullified. Never gift a car or sell it to a family member below fair market value in an effort to shield it from bankruptcy. If you own multiple vehicles needed for a business, such as a towing business or construction firm, ask a Minnesota bankruptcy attorney if a Chapter 11 bankruptcy may be right for you. Do you need the trucks, tractors or ATVs for your farm? Minneapolis bankruptcy lawyers can help you determine if you are eligible for a Chapter 12 bankruptcy. While it is restricted to farmers and fishermen, it is cheaper than Chapter 11 bankruptcy and can offer more forgiving terms.
Editor’s disclaimer: this article is for information only, and does not constitute legal advice. Since everybody’s own personal circumstances will be different, it is important to get profesional advice from a lawyer or independent financial advisor in order to best manage your individual financial affairs.
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