Most people mistakenly believe that filing bankruptcy wipes out an auto loan and keeps the vehicle free and clear of payments. It just isn’t true. When you file for bankruptcy, you will no longer be liable for the loan. If you do not make the payment, however, you won’t have the car for long. Therefore, bankruptcy won’t give you a free car.
In a typical chapter 7 bankruptcy proceeding, a trustee is appointed by the court to preside over the case. However, the other party in the case is your creditor and so, you will be required to satisfy both and that can be a tricky business.
The Bankruptcy Trustee won’t let you keep the car unless you protect the equity built up in it with a Motor Vehicle Exemption. If that is not sufficient then to cover up your car equity then you will have to check whether you can get a wildcard exemption. Most states allow bankruptcy filers to use both for seeking vehicle exemption in bankruptcy filing for protecting their car equities.
Thus, you can keep your car in chapter 7 bankruptcy only if you are able to protect its in-built equity with permission from the Trustee. But if the vehicle has a lien associated with it, the loan dealer still reserves the right to repossess it.
To keep your creditor quiet and permit you to keep the car, you must be current on monthly car payments and stay current till the chapter 7 bankruptcy case ends. Alternatively, you may have to pay the actual dues or consider redeeming the vehicle to the lender after filing for chapter 7 bankruptcy.
In case, you have gone upside down on the auto loan or are lagging behind on payments then it will be better if you file for bankruptcy under chapter 13. Such a prerogative may allow you to keep your car on finance and repay the remaining debt with a favorable monthly payment plan that is spread over a 3 to 5 years timeline. The court-appointed Bankruptcy Trustee may approve the plan that is agreed upon by the creditor during a 341 meeting or hearing between the trustee and the creditors.
Nevertheless, if you fail to adhere to the auto loan debt repayment plan, the creditor can repossess your car under chapter 13 bankruptcy filing. Again this way also you may not be able to keep the car. You can learn more about your chances of keeping a car under loan finance during chapter 7 or 13 bankruptcy by talking to experts today!