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What Happens to Cars and Car Loans in a

Bankruptcy?

Are you considering the option of filing for bankruptcy as a way of relieving

yourself of some crippling debt while having a chance at a fresh financial

start? If so, one thing you may want to consider is what will happen with

your car once you declare bankruptcy. If you're leasing or still making

payments on your vehicle, you may understandably be worried about it

being repossessed. This can be a real

problem, as rebuilding your finances

following a bankruptcy often requires the

use of a vehicle to maintain a steady job.

The good thing is that there are some

options for keeping your vehicle even after

you have filed for bankruptcy. However,

you will need to take some proactive steps to help make this happen.

Furthermore, the steps you'll need to follow can vary depending on whether

you're filing Chapter 13 or Chapter 7 bankruptcy.

Chapter 13

If you're planning on filing Chapter 13 bankruptcy, the process of keeping

your car will likely be a bit easier. This is because, with Chapter 13, the idea

is not to eliminate your debt but to restructure it in a way that makes it

feasible for you to pay off. As such, upon declaring Chapter 13 bankruptcy,

you can work with your creditors to come up with a viable payment plan. If

your car loan is less than 910 days old, then you'll still be required to pay off

the full amount owed. On the other hand, with car loans more than 910 days

old, the amount you repay is based on what the current value of your car is.

Chapter 7

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Unlike Chapter 13 bankruptcy, Chapter 7 does not restructure your debt so

much as it allows you to trade in assets for the elimination of some debt.

The best way to go about keeping your car after filing Chapter 7 bankruptcy

is to do what's referred to as "reaffirming the debt." This means that you

make an agreement with your car loan company to continue making timely

payments on the vehicle so that you can keep it. However, in order to do

this, you may have to agree to surrender some of your other assets or

property. Another less desirable option may be to surrender the car in

exchange for a more affordable one.

As you can see, there are plenty of ways to keep a car even after declaring

bankruptcy. Be sure to keep this advice in mind as you work towards a more

stable financial future.