Can I keep my car in bankruptcy?

Posted on July 1, 2013 by Staff Writer

Yes, there are many provisions in the United States Bankruptcy Code that will allow you to keep your car in most situations. You will need to file the right papers and finish making payments, but you can likely keep your car.

A better question is if you should keep your car and what your bankruptcy lawyer is willing to do to help you decide, r even reduce your payments. There is a provision in section 722 of the Bankruptcy law that allows you to pay the value of your car, regardless of what you owe. You could actually pay less for your car because you filed bankruptcy with one of our experienced bankruptcy attorneys. There is additional work involved and a lot of firms treat you like a number in their production line bankruptcy business and will not take the time to see if such redemption would help you, let alone be willing to do the work free like we will. We could save you more money than you pay us. We don’t just make our bankruptcy process fit, we take the time to know you and tailor our process to your needs. Does your bankruptcy lawyer offer that?

Get free help now by scheduling a no obligation consultation with one of our bankruptcy attorneys. We will do the right thing for you that others won’t even offer.

Can bankruptcy help with an underwater car?

Posted on March 2, 2013 by Staff Writer

Absolutely, bankruptcy can help if you owe more on your car than it is currently worth. Let’s take a look at how it can specifically help.

Chapter 7 – 722 Redemption:

Filing for Chapter 7 bankruptcy can allow you to reduce the amount you owe on your vehicle. Through a “722 redemption” you can seek a court order that allows you to pay your car loan company a lump sum payment equal to the market value of your vehicle. So for example; most people going through bankruptcy don’t have a lump sum amount to pay off their vehicle, however, there are several companies that do 722 redemptions and who will finance the lump sum payment. They will pay off your original loan and then you will make monthly payments to them.

How does the 722 Redemption work?

Under 11 U.S.C. 722 of the Bankruptcy Code you may redeem tangible personal property from a lien through paying the secured creditor a lump sum in a Chapter 7 Bankruptcy. In order to be eligible for a 722 redemption the property must be: 1) Tangible personal property intended primarily for personal, family or household use; 2) The secured claim must be paid a lump sum; and 3) The lump sum payment must be based on the current retail value.

If you wish to redeem your vehicle in a Chapter 7 bankruptcy then you need to apply for a 722 redemption loan. We closely work with several banks that can assist you in applying for one of these special loans. Typically, the interest rate is higher than normal due to the risk involved for the lender. Once you have received a 722 redemption loan and are in a Chapter 7 bankruptcy, a motion will be filed to redeem the vehicle. If the motion is granted by the court then the secured creditor will be paid a lump sum amount based on the current retail value of the vehicle. The secured creditor will then release the lien held on the vehicle.

Chapter 13 and the Car Cramdown:

If the amount of your car loan is greater than the value of your car, you might be able to reduce the amount of your loan and the interest rate in a Chapter 13 bankruptcy through a cramdown. Cramdown is a funny word that basically means you can reduce the amount you owe to equal the current value of the car. Whatever is left becomes unsecured debt, and is treated like your other unsecured debts.

Cramdowns are available in Chapter 13 bankruptcy only — you cannot cram down a car loan in Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you propose a repayment plan to pay back your creditors over a three to five year period. In your plan, your attorney has the ability to propose that your car lender receive only the current value of your car instead of the current balance owed.

The unpaid portion of your loan is then treated as an unsecured debt. Other types of unsecured debt include credit cards and medical bills. Since most Chapter 13 plans pay little or nothing to these creditors, this means that your car lender will likely receive nothing or pennies on the dollar on the remaining balance of your loan. Upon completion of your bankruptcy, any unpaid balance on the car loan will be completely discharged and you will own the vehicle free and clear.

When you cram down a car loan in Chapter 13 bankruptcy, the law also allows you to lower your interest rate on the loan! In Arizona the interest rate will be determined by the current prime rate plus a little extra. Almost always this new interest rate is lower than your original car loan rate.

The bankruptcy code has placed an important restriction on when you are allowed to cram down your car loan. In order to cram down a car loan, you must have purchased your vehicle at least 910 days (about 2 ½ years) prior to filing your bankruptcy. If you are underwater on one or more of your vehicles let us show you how bankruptcy can help you.

Will I Lose my Car if I file for Bankruptcy?

Posted on January 24, 2013 by Staff Writer

Will you lose your car if you file for bankruptcy? Generally no, however, there are some exceptions that you should be aware of. Section 362 of the U.S. Bankruptcy Code provides an “Automatic Stay” to protect consumers from their creditor’s collection activities during bankruptcy. Unless a creditor files a Motion to Lift the Automatic Stay they cannot repossess a vehicle during the bankruptcy. A Motion to Lift the Automatic Stay is nothing more than a creditor asking the bankruptcy court for permission to pursue its collection activities. A creditor must have a legitimate legal reason for why the Automatic Stay should be lifted otherwise their request will be denied. But the most common reason for allowing a creditor to pursue its collection activities is if the debtor is behind on payments. So in order to keep your car safe from the bank during the bankruptcy you need to be on time and stay on time with your payments.

Additionally, vehicles are protected from creditors and the bankruptcy court by law. A.R.S. § 33-1125(8) provides that Arizonians who are single can have up to $5,000 of equity in their vehicle. Married couples have a $10,000 exemption. The $10,000 can be used entirely on one vehicle or can be split equally between two cars. Also, people who have a handicap license plate receive a $10,000 exemption. So for example, if you are single and own a vehicle that is worth $4,999, the bankruptcy court cannot touch it. However, if you are single and own a vehicle that is worth $7,000 then you are over the exemption amount by $2,000 and the court is going to ask for $2,000 in order for you to keep it.

Bankruptcy laws and how they pertain to vehicles can be confusing however, during a free consultation you can speak with one of our skilled attorneys and see how your vehicle can be protected in bankruptcy.

Can I keep my Car if I file for Bankruptcy

Posted on July 11, 2012 by Staff Writer

Can I keep my car? Most likely, yes. There are many ways to keep a car through the bankruptcy process and only a few where you would not be able to. A free consultation with your Arizona bankruptcy attorney would answer all of these questions.

A better question might be, “should I keep my car?” There are a few considerations first. Do you owe money on your car? Do you owe more than your car is worth? Is there equity in your car above the exemption amount?

If you have equity in your car, you might not know how much. Check the balance of your loan and the value of your car @ kbb.com. If you do, and it is greater than the exemption amount, advice from your bankruptcy lawyer can help you deal with this. If you have equity but it is less than the exemption amount you can elect to keep your car, but you would have to finish making the payments. The bank is forced by the court to let you.

If you have no equity in your car or you owe more than it is worth or if you don’t like your terms, you can give it back. The bank will be forced to take your car back and you will owe nothing.

You can also buy your car for the amount it is worth. This is an extra court filing. Make sure your bankruptcy attorney will do this before you consider retaining him. This is called a redemption. To make sure your attorney will help you with this. CONTACT US.

What should a debtor know about keeping car in Chapter 7

Posted on May 14, 2012 by Staff Writer

1. The debtor has to determine which state’s exemptions apply. Consult an attorney regarding this because this is VERY IMPORTANT. For example, in Arizona, a debtor can protect up to $5000 above what is owed on a vehicle ($10,000 if the debtor is disabled). So, if there is no lien on the vehicle and the vehicle is worth $5000 or less, then the debtor can keep their vehicle. If the vehicle is worth more than $5000 then the Trustee who oversees the file, could either sell the car and give the debtor their $5000 or the debtor could make arrangements to pay the difference of the sale value and the $5000 to the Trustee.

2. If the vehicle has lien and the debtor wants to keep the vehicle the same rules apply as to value. If the value of the vehicle is equal to or less than the lien plus $5000 then the debtor can keep their vehicle. If the value of the vehicle is more than the lien plus $5000 then the debtor would be in the same situation as described in 1. above.

3. Another thing to remember is that sometimes, after filing bankruptcy, a finance company will renegotiate a better “deal”. It doesn’t always happen, but it is worth asking.

4. Once a debtor decides to keep a vehicle with a lien, then the debtor needs to decide if they want to “reaffirm” or renew the debt obligation with the finance company. If they decide to “reaffirm” then the debtor will not be able to avoid any future debt responsibility for the vehicle loan. This could defeat the purpose of filing the bankruptcy because now a debt that could have been eliminated is not. An option that many debtors take is to do what is called “pay as you go”. Some finance companies will allow a debtor to continue to pay on the car without reaffirming or renewing the debt. In that case, if the debtor is unable to pay in the future, they can give the vehicle back and have no debt to pay even if the loan was not paid off. That is because the debt was not “reaffirmed”.

5. Finally, by doing a “pay as you go” one thing to know is that the loan company will not report either payments or non-payments to the credit reporting agencies. And, if you miss a payment or more, the loan company will not be able to contact you unless you give them authority to do so. This is because the bankruptcy law prohibits the loan company, as a creditor, from contacting a debtor who has discharged a debt. And, because the loan on the vehicle was “technically” discharged, the loan company will not contact the debtor who does a “pay as you go” unless the debtor gives authority for the loan company to do so.