Can You Keep Car In Chapter 7 – Bankruptcy isn’t always straightforward – but sometimes, it’s the best way to get out of debt. Before you file for bankruptcy, you may be curious if you can keep two of your most valuable assets: your home and your car.

Since March 2020, used car prices have increased by almost 40%, while house prices have increased by around 20%. As a home or car owner, you may want to keep the property increasing in value. However, if you are trying to pay off debts and declare bankruptcy, the court may be inclined to sell valuables to repay creditors.

Can You Keep Car In Chapter 7

Can You Keep Car In Chapter 7

Because home and car prices have risen rapidly in recent years, the value of your home and car can change your bankruptcy plan.

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You can file two main types of bankruptcy: Chapter 7 and Chapter 13. Each filing will affect your assets (items of value) in a different way.

In Chapter 7 bankruptcy, the court can wipe your slate clean. But first, you may have to sell some assets to pay off your debt.

Chapter 13 bankruptcy works differently. Instead of paying off your debt, you enter into a repayment plan, usually for 3-5 years.

In bankruptcy, you may be “excluded” from certain assets. Exempt assets are assets (or the equivalent dollar amount) that you are allowed to keep. Each state and federal government set their own exemption limits.

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Another concept to be aware of is equity. Simply put, assets are the net worth of assets. For example, your home is worth $100,000, but you owe $50,000 and your assets are $50,000. Assets represent the value of what you own.

Filing for bankruptcy does not automatically mean you will lose your home. Both Chapter 7 and Chapter 13 bankruptcies have provisions to avoid this outcome, such as an “automatic stay” to stop temporary foreclosure proceedings from taking the home. But that doesn’t mean you are

Some states offer “homestead exemptions” to help you protect your property. Ideally, this is a dollar value (or sometimes an acreage limit) for the property you can protect. To claim this exemption, you generally must have lived in your home for at least 40 months.

Can You Keep Car In Chapter 7

Whether you can keep your home under Chapter 7 depends on your property, mortgage, and state exemptions.

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To begin with, if your state has a homestead exemption, you can immediately protect some of your property’s value. The court will then determine if there is enough “residual” equity to sell your home. If you don’t – for example, if you have a lot of debt – you may be able to keep your home.

However, the court may not just “give” you the house. If you default on your mortgage, your lender has the right to foreclose and take your home (unless (even if you will fix your loan).

Chapter 13 works a little differently. First, the court deducts your mortgage and home foreclosure from the value of your home. The court will then add the remaining property value into your “available” funds that can be used to pay off your debt.

Under this system, you are not forced to sell your home as long as you keep up with your payments. But if you have a lot of property value, the court may determine that you can “pay” to pay off your debt.

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With car prices skyrocketing, your car becomes a potential target during bankruptcy proceedings because selling it will bring in more money to pay off the debt. But, just like your home, many states have requirements to help you maintain your car, too.

Most states offer ways to help you keep your home and car (or at least some of their value) during bankruptcy. But exemptions and limitations vary by state – as do other bankruptcy laws. Due to the rising prices of both homes and cars, you need to carefully evaluate your options to save on your home and car.

Instead of seeking bankruptcy on your own, consider a bankruptcy attorney to help you keep as much of your assets as possible!

Can You Keep Car In Chapter 7

We serve clients throughout the state of Mississippi including those in the following localities: Madison County including Canton, Madison, and Ridgeland; Forrest County including Hattiesburg and Petal; Warren County including Vicksburg; Lauderdale County including Meridian; Harrison County including Biloxi, Gulfport, Long Beach, Pass Christian, and Saucier; Hinds County including Clinton and Jackson; Jackson County including Moss Point, Ocean Springs, and Pascagoula; and Rankin County including Brandon, Florence, and Pearl.

What Assets Can I Keep In Chapter 7 Bankruptcy?

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© Copyright Rollins Law Firm – All Rights Reserved. | Powered by Advantage Attorney Marketing & Cloud SolutionsFiling for bankruptcy is a serious decision that can damage your credit for seven or 10 years, depending on the type of bankruptcy. But if you’re drowning in debt that you can’t pay, it can be a last resort to help you hit the “fix” on your finances.

There are two main types of bankruptcy: Chapter 7, which partially discharges debts, and Chapter 13, which focuses on the discharge of debts. What happens to your car in bankruptcy depends on both the type of bankruptcy you file and the amount of equity you have in your car.

There are many factors that go into whether you will be able to keep your vehicle through the bankruptcy process. Since your vehicle is considered an asset, and may be valuable, it is something that creditors may pursue when seeking debt collection. However, your vehicle may be counted under an exemption that protects it from repossession. In general, the following are considered to determine whether you will be able to keep your car:

What Is Chapter 7 Bankruptcy & Should I File?

Read on to learn more about what you can expect to happen to your vehicle when you go bankrupt.

Filing for Chapter 7 bankruptcy can wipe out unsecured debts, but it may still require the sale or surrender of certain assets to pay off the debt. Items that are exempt from payment, and the amount that can be exempted, vary by state.

If you file for Chapter 7 bankruptcy and local bankruptcy laws allow you to discharge all the equity you have in your car, you can keep the car – as long as you stay on top of your loan payments. And if the market value of the vehicle you own immediately is less than the exemption amount, you are in the clear.

Can You Keep Car In Chapter 7

To determine how much equity you have in the vehicle, subtract your current loan balance from the car’s value. Because vehicles tend to depreciate in value quickly, you may not have much equity unless you are nearing the end of your loan term.

What Is Chapter 7 Bankruptcy?

Once you’ve determined how much equity you have in your vehicle, check what your state’s vehicle exemptions are. If you have less than the deductible, the car will be protected. For example, if your state exemption limit is $4,000 and you have $3,500 in equity in your vehicle, you can keep it.

Another form of bankruptcy is Chapter 13, which works a little differently than Chapter 7. Instead of paying off non-exempt assets to pay off creditors, you enter into a debt settlement plan. Your property is not sold off with this form of bankruptcy; Instead, your finances are reorganized and you begin the repayment process. If you own your car right away you will be able to maintain it.

You’ll have a repayment period of three or five years, and when that period ends, some of the remaining debts can be discharged – meaning you don’t have to pay them anymore. However, not all debts can be discharged. Credit card and medical debt can be discharged, for example, but mortgages and student loans cannot.

Remember that if you can’t get a car loan, or you can no longer afford to repair or pay for the car, you can get out of paying by giving the car back to the lender, which, like As mentioned, there are credit consequences.

What Are The Different Types Of Bankruptcies?

Both types of bankruptcy can seriously damage your credit for years to come, so filing is not an action that should be taken lightly.

Chapter 7 bankruptcy stays on the credit report for 10 years, while Chapter 13 bankruptcy Dissolve stuck in seven years. This means that even nearly a decade after filing, potential creditors, lenders, landlords, utility companies and others who are allowed to view your credit will be able to see the bankruptcy on your report. A bankruptcy on your record can cause you to be rejected for new applications, such as for a loan or credit card. If the lender or creditor approves you, you may face high interest rates or fees.

However, in the meantime, you can help rebuild your credit by making smart financial decisions. If you pay all your bills on time, avoid overspending, and use secured credit cards responsibly, you can slowly rebuild your credit score.

Can You Keep Car In Chapter 7

When you file for bankruptcy, it is wise to start monitoring your credit regularly. This allows you to see how bankruptcy works

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