A common concern for debtors that are considering filing for bankruptcy is whether or not they are going to lose their vehicle if they file a bankruptcy. The answer to this question depends on several factors so it would be in your best interest, if this is a concern of yours, to consult a bankruptcy attorney in your area.
If you are filing a Chapter 7 bankruptcy, which will discharge all of your unsecured debts, you still may be able to keep your vehicle, but it mostly depends on whether or not you have equity in that vehicle. For example, if you own a vehicle without a loan on it and your vehicle is worth $5000, the trustee will take an interest in that vehicle. The trustee’s job is to find assets, liquidate them and then disperse the money to unsecured creditors to pay off your bills. In Missouri, we have exemptions that can protect your personal property. If you are a single filer, you can protect up to $3000 of equity in your vehicles. If you are a joint filer with your spouse, the exemptions allow you to protect a total of $6000 in your vehicles. To sum it up, if you have a loan on your vehicle and your vehicle is worth less than what you owe on it or if your vehicle is worth more than what you owe, but less than $3000 more, then you will not have any issues keeping your vehicle. If your vehicle does have equity, then you have a couple of options. Those options include surrendering your vehicle to the trustee, making a cash offer to the trustee that will enable you to keep the vehicle or filing a Chapter 13 bankruptcy and paying off the equity through the course of the Chapter 13 plan.
A Chapter 13 bankruptcy is a good option if you have equity in your vehicle. You could pay back the equity over the course of the plan and that money would go to some of your unsecured creditors to help pay them back what you owe them. Additionally, a Chapter 13 can also save a car if you are behind on your payments or, in certain circumstances, if your car has been repossessed. If you were to file a Chapter 13 bankruptcy, your loan balance for your vehicle will be put inside the plan and paid off over 60 months at the court’s interest rate, which is often a lower interest rate than you received in your original contract with your lender. Additionally, if you are having a hard time making your car payments because they are too high, a Chapter 13 can stretch those payments out over 5 years and make it more affordable.
To summarize, the bankruptcy laws are written to give the debtor an opportunity to protect their personal property, but the laws can be complex and it is always a good idea to speak to an attorney so you know exactly what your rights are in regards to your vehicle and any other property you might own. If you have questions about this article or anything else related to bankruptcy, it is my recommendation that you consult a St. Louis Bankruptcy Attorney today. We offer free consultations at a number of locations in the area.