If I am considering filing a Chapter 7 bankruptcy shouldI stop paying on an auto loan?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
If I am considering filing a Chapter 7 bankruptcy shouldI stop paying on an auto loan?
Asked on February 9, 2011 under Bankruptcy Law, Ohio
Answers:
M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
In a Chapter 7 bankruptcy a debtor has 3 options regarding a car loan:
1. Surrender. You can contact the lender and turn in your car. Once you "surrender" the vehicle, your lender will sell it. If it is sold for less than the amount that you owe, the remaining balance is called a "deficiency". It should be eliminated in your bankruptcy.
2. Reaffirm. You typically have the choice to "reaffirm" your current car loan. Reaffirming a loan means that if you fail to make payments after your bankruptcy is closed, if your lender repossesses your car, you can be sued for the deficiency balance. However, to keep receiving statements and balance updates, you must reaffirm the debt.
3. Redeem. The bankruptcy code permits an owner to reduce the current car balance to the fair market value. So, for example, if you owe $16,000 and the car is worth only $9,000, then you may be eligible to reduce the car balance by $7,000 with a new, post-bankruptcy loan. This is known as "redemption". As a general rule, you must own the car for at least 910 days before your bankruptcy filing in order to qualify for a car redemption loan.
You may want to consult further consult with a bankruptcy attorney in your area.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.