Getting behind on bills is often a result of insufficient earnings caused by unemployment or reduced hours at work. It may also be that an unexpected expense makes it impossible to pay credit cards and car loans on top of basic, but necessary, monthly expenses. Those earning less than the median income in their area for an extended period, or those who have extraordinary expenses that make it impossible to make ends meet, may be eligible for Chapter 7 “liquidation” bankruptcy. For individuals and couples with more income and assets they wish to keep, but who are nevertheless in a difficult financial situation, a Chapter 13 bankruptcy repayment plan may help them get back on track.
Keeping a Vehicle in Bankruptcy
Many who are considering bankruptcy are particularly concerned about keeping their car because they not only depend on it for employment, but need transportation to fend for a family. Although a car loan is considered secured debt (in the amount of the value of the car) and cannot be discharged in the bankruptcy, a Chapter 13 bankruptcy may allow a borrower to discharge debt owed for any amount over the ‘value of the car’, secure a lower interest rate, and stretch payments over a longer period of time. For example if a borrower owes $10K on a car that is valued at $8K, they may be able to discharge the difference of $2K in a bankruptcy, have their interest rate reduced a point, and extend the repayment period over several more months so that they are able to keep the car.
In a Chapter 7 bankruptcy, a trustee will take any non-exempt assets and sell them to pay off creditors in return for discharging unsecured debt such as credit cards and medical bills. Those with vehicles valued at or below the bankruptcy exemption available for a car may be able to keep their vehicle in a Chapter 7 bankruptcy. If the exemption falls short of the value of the car, they may wish to apply the bankruptcy wildcard exemption to make up the difference. For example if you own a car that is valued at $3K with a bankruptcy vehicle exemption allowance of $2,400, the $600 dollar difference may be exempted using a portion of the $4K wildcard exemption.
Those who have a car loan outstanding may be able to work with the lender directly to reaffirm the loan (promising to pay) after they discharge unsecured debt such as credit cards and medical bills that were siphoning off income that can now be applied to the car payment. A Chapter 7 automatic stay allows filers time to work out a possible solution to keep their vehicle if they are facing car repossession.
Contact Bankruptcy Lawyer Charles E. Covey For Answers
When you have fallen behind on bills including a car payment, do not wait to act, contact an experienced bankruptcy lawyer to explore strategies to improve your financial future. The first step is getting the information you need to determine if bankruptcy is the right strategy for your unique situation. Contact Peoria bankruptcy lawyer Charles E. Covey for answers to your bankruptcy questions at 309-674-8125.
