If I just bought a car 6 weeks ago and am now filing for Chapter 13, what will happen to the car and will I be able to keep it?

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If I just bought a car 6 weeks ago and am now filing for Chapter 13, what will happen to the car and will I be able to keep it?

I just bought it 6 weeks ago.

Asked on March 8, 2011 under Bankruptcy Law, Missouri

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Chapter 13 does not directly affect assets, the way chapter 7 does, so the car would not be considered as an asset available to pay creditors generally. The means what happens depends on whether you financed the car (and presumably, the creditor has the right to repossess if you don't pay) or bought it outright.

If there's a secured (by the right to repossess) loan or financing, then the chapter 13 plan must provide that you can and will pay the loan as scheduled; if you can't or won't, the lender gets the car, though you will not be responsible for any remaining balance on the loan after that. (If the car had been bought a few years ago, you might only be responsible for paying an amount equal to the car's current value, if less than the loan; but on a recent purchase, you have to pay the full loan.)

If you paid cash for the car, then it should be yours, unless some creditor can challenge the transaction in some way (e.g. that you paid the money to a relative in a "sham" deal, to shelter your money).


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