What to do about payng a car loan to avoid repossession if you have filed for bankruptcy?

UPDATED: Apr 10, 2013

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What to do about payng a car loan to avoid repossession if you have filed for bankruptcy?

We have filed for Chapter 7 and have our meeting of creditors next month. Due to financial strain, we opted to represent ourselves. We have come accross a couple of issues that we are unsure of how they will affect our bankruptcy case. My father-in-law passed away last fall and we have his vehicle. We made a couple of payments but are behind on his payments. The finance company wants $600 or it plans to repossess the vehicle. If we make that payment to them, will the court see that as money we could have given to our own creditors? We do not want to do anything that might jeopardize our case. Also, there is a possibility that we may receive a payout from my father in laws pension. Are they entitled to it?

Asked on April 10, 2013 under Bankruptcy Law, Arizona


Anne Brady / Law Office of Anne Brady

Answered 9 years ago | Contributor

In a bankruptcy in Arizona, you are allowed to keep one car with a value of $5,000 or less.  If this car is worth $5,000 or less, you are good to go.  If it is worth more than that, you will want to talk to the trustee about selling the car and buying yourselves a cheaper one.  There also are exemptions for pension proceeds, but it would depend on the circumstances.  You really should consult a bankruptcy attorney.

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