Will I Lose My Car in Bankruptcy?
I have a car from Carmart. If I filed for bankruptcy, would I be able to keep the car? I still have 13 more months of payments ahead of me and because the payments are so ridiculously high, I just don’t think I can do it. I was told if I file for bankruptcy, a car cannot be taken away. I just find that too good to be true.
That is not quite the whole answer. It depends on the type of bankruptcy you file, the e value of your vehicle, and whether or not you want to keep your vehicle.
In general, here is how Chapter 7 and Chapter 13 treats vehicles:
- If you file a Chapter 7 bankruptcy and you want to keep a car (or any other “secured” debt) you have to do a formal contract through the bankruptcy called a reaffirmation agreement. If you have been late on your payments your creditor might decide not to agree to allow you to keep your car and you would lose your car.
- If you file a Chapter 13 bankruptcy you will be paying your payment through the plan and the creditor cannot take your car away as long as you are making your payments.
A Chapter 13 will also often lower your car payment because the Courts allow a lower interest rate than most people are able to get on the open market and you have the whole term of the bankruptcy to pay your car in full.
Bankruptcy Exemptions for Cars
In some situations, your car may also be exempt from liquidation in a Chapter 7 bankruptcy if the market value of the vehicle is less than the state or federal exemption amount. In Arkansas, you can choose to use the state or federal exemption, whichever is higher.
Contact Us to Learn More
If you are concerned about losing your vehicle to bankruptcy, contact our attorneys to learn your options. We can help you find a way to keep your car.