What happens to your car if you file for bankruptcy?
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What happens to your car if you file for bankruptcy?
I am considering filing for bankruptcy. The only problem is that I have is the risk of losing my vehicle. Nothing fancy but I need transportation.
Asked on November 4, 2011 under Bankruptcy Law, Nevada
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
You should consult with a bankruptcy attorney before filing bankruptcy; there are a number of different issues to explore. (For example, certain debts--like taxes, student loans, or spousal or child support--are almost impossible, or completely impossible to discharge in bankrutpcy.)
Another issue is what kind of bankruptcy do you file? A chapter 7 bankruptcy involves liquidating your assets--bank accounts, property, vehicles, belongings, etc.--to pay creditors as much as possible, after which the remaining debts are discharged. If you file chapter 7, you could potentially lose your car, though there are some exemptions from liquidation--i.e. some assets that don't have to be liquidated. A vehicle of low-enough value may be safe (may fall under the exemptions), though a higher-value vehicle would not be.
A chapter 13 bankruptcy, on the other hand, involves coming up with a plan under which you will repay creditors as much as possible over 3 - 5 years from you income--basically, spending every dime beyond what is needed to basic living expenses on repayment--after which remaining debts are discharged. Chapter 13 bankrupcy does not force the sale or liquidation of assets or vehicles.
So what happens to your car will depend on what kind of bankruptcy you file and the value of the car, among other factors. That is why you need to consult with a bankruptcy attorney to determine what is best for you to do.
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