One of the biggest concerns people have when filing for bankruptcy has to do with what property they will lose. Will they lose their home or their cars? This is one of the biggest misconceptions and common bankruptcy myths. Florida’s motor vehicle exemption can help you keep your vehicle when filing for bankruptcy. It is highly likely you will be able to keep certain pieces of property, including your vehicle when you file for bankruptcy.
I think more than anything, THIS was the main reason I hesitated in filing bankruptcy a long time ago. When I filed bankruptcy in 2008, I knew a little about bankruptcy from what I learned in law school but that was it. A mentor who taught me about bankruptcy and what it can do taught me that most people that file bankruptcy only lose their debt.
So in a nutshell, if you are making payments for your car, you can keep paying every month and keep your car. We, as lawyers, have to rely on our skills and experience is when someone walks in with a paid off car worth over $10,000. There are ways we can protect that too.
Type of Bankruptcy
When it comes to Chapter 7 bankruptcy, the filer has three options: reaffirm the debt, redeem the car, or surrender it. By reaffirming the debt, the person continues to make payments on the car. If the person wishes to keep their car, he or she must sign a Chapter 7 Individual Debtor’s Statement of Intention. The individual must continue making scheduled payments on the vehicle and if they are unable to do so, the vehicle is at risk of repossession by the lender. Our law firm is one of the only law firms that will sign the reaffirmation agreement.
Most lawyers do not sign the documents for you to reaffirm the loan of your car and thus, make it necessary for you to take a day off and go to court because your attorney did not sign the reaffirmation agreement. I sign because I take your word for it. If you tell me, you can make the payments – who am I to say that I don’t believe you? Ask your attorney if he signs reaffirmation agreements. I do.
Redemption is a very cool way to bring the car down to fair market value. By redeeming the car, the person must come up with the money needed to make one lump-sum payment towards the car. Of course, in the real world, you probably wouldn’t be filing bankruptcy if you had enough money to pay off your vehicle’s fair market value. That is where www.722redemption.com comes in. We work with them on many cases to reduce cars to fair market value.
The final option is to surrender the car, which means the person gives up the car. The benefit of this is the person has the opportunity to purchase a less expensive, more affordable vehicle. Normally during he bankruptcy, we discuss how the client can continue to keep driving the car until they are ready to let the car go. We have relationships with lenders that will help you get into a new car the day after your discharge and in some instances, during the bankruptcy. So do not worry about the question, “When will I be able to buy another car?” The answer is immediately.
A Chapter 13 bankruptcy allows you to work out a plan to catch up on any missed payments and keep your current car payments up to date. This payment plan would include the car loan debt. However, how the car loan is handled depends on how old the car is. Newer loans, meaning cars that are less than 910 days old, must be paid off in full under a Chapter 13 filing. However, under the bankruptcy guidelines, it is possible that the interest rate could at least be reduced, which would make meeting the monthly payments easier. If the car loan is older than 910 days, the court gives the borrower a payment amount that is pro-rated, based on the value of the car or fair market value.
Both types of bankruptcies include the protection of the automatic stay, which means that the filer’s creditors will not be able to continue collection attempts once the case is filed.
Keeping Your Car in Chapter 7
If you are current on your auto loan payments, you will be given the option to either “redeem” your car, which means pay the lender a lump sum to purchase the car, or “reaffirm” the car, which means you will enter into a new payment agreement under similar terms to your original loan agreement. It is possible to redeem and keep your car as we discussed above if you have the funds to do this or find someone that does like the company our law firm works with, but the better chance most filers have is to seek a reaffirmation agreement with the lender. This new agreement will incorporate your missed payments, as well as future ones. You must remain current on this new agreement to keep your car.
What is included in a reaffirmation agreement? The lender must believe you will make a good faith, realistic effort to pay on the debt before negotiating with you. Once an agreement is reached, the bankruptcy court will need to approve of it first, after the judge decides the reaffirmation agreement is in your best interest. This approval can also be done by your bankruptcy attorney in lieu of a hearing before the judge. Your attorney will review the agreement, sign approval, and submit to the court. Make sure you keep up on your payments under this new agreement if you wish to keep your car after the agreement is signed and ordered by the court.
If you have questions on this topic or are struggling with debt, call us today to schedule a free consultation. The Benenati Law Firm has eliminated nearly a billion dollars of debt for its bankruptcy clients, making the firm one of the top twenty filers of bankruptcy in the nation. We have helped thousands of individuals and families eliminate their debt and get a fresh start financially. The day you hire our firm, we will contact your creditors to stop the harassment and collection calls. We make our hours convenient for our clients and offer digital sign-ups and free consultations on Saturdays (9:00 a.m. – 3:00 p.m.) and throughout the week until 5:00 p.m. If you are in a financial crisis and considering filing for bankruptcy, contact an experienced Orlando bankruptcy attorney who can advise you of all of your options.