With Chapter 7 bankruptcy or Chapter 13 bankruptcy, you may have the option of keeping your vehicle. However, there are requirements that have to be met. For example, in a Chapter 13 plan, the creditor needs to agree to your new repayment schedule. The plan will need to be structured in a way that allows you to keep the vehicle.
With Chapter 7 bankruptcy, you will potentially have exemptions that allow you to keep your vehicle. However, if this is not your primary vehicle or it is over the acceptable value, you may lose it when your assets are liquidated.
If you want to reaffirm your debt, what should you do?
If you would like to reaffirm your debt, then you will need to pursue a reaffirmation agreement. This agreement will need to be approved by the judge presiding over your bankruptcy case. Additionally, to get approval, the judge may ask that the lender reduce the principal balance or interest rate. If the lender isn’t willing to do that, then it may be difficult to get the debt reaffirmed.
You will also have to show that you can afford the payments, which will be tricky depending on how much disposable income you have left based on your bankruptcy paperwork.
If you already paid off your vehicle, is it at risk during bankruptcy?
Unfortunately, even if you have paid off your vehicle, it may be at risk during your bankruptcy. You may need to use exemptions to cover the value of your vehicle. Any value that you can’t exempt could put your vehicle at risk, because the bankruptcy trustee may seek to sell it to get the money needed to pay back other lenders. This is only a risk in liquidation bankruptcy, not Chapter 13.
It’s smart to get the right support for your case
If you want to keep your vehicle following bankruptcy, it’s a good idea to talk to your attorney and to get to know the state regulations that apply to your case. That way, you can take steps to exempt your vehicle or continue to make payments.