If I claim bankruptcy will I still be responsible for paying a 5 year old car loan?

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If I claim bankruptcy will I still be responsible for paying a 5 year old car loan?

I’ve been out of work for more than a year. I have lost my apartment and my license and have not earned any income in a year. The car was reposest 5 years ago and I continually get brought to court for the remaining balance after they sold it at auction. I have no prospects for work and do not want to go to jail for not being able to pay this off.

Asked on April 5, 2012 under Bankruptcy Law, Massachusetts

Answers:

John Keane / Law Offices of Attorney John P. Keane

Answered 9 years ago | Contributor

No, you will no longer be responsible for the car loan once you have filed bankruptcy and all court actions regarding this loan will cease. A bankruptcy filing will discharge all your debts with a few exceptions.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Bankruptcy will let you discharge this loan; and since the car has already been repossesed, you do't even need to worry about losing the vehicle.

However, you would not go to jail for failing to repay a loan--debtor's prision is a thing of the past. A person might only incur criminal, as opposed to civil (i.e. being sued), liability in regards to nonpayment if he or she had criminal intent at the time he or she took out the loan--that is, it's only a crime if you lied to get the loan, or took out a loan with no intention of every repaying it. Otherwise, not being able to pay, such as due to loss of a job, is not a crime.

Since you will not face jail time and filing bankruptcy is a drastic option, with significant impacts on your credit rating and credit history for up to a decade, you should consult in person with a bankruptcy attorney, to see if this really is the best option for you. Also, there are two very different types of bankruptcy, chapter 7 (where your assets are liquidated, or taken annd sold for the benefit of creditors) and chapter 13 (where you are given a court-ordered payment plan or budget to live under for several years, so you can pay as much as possible to your creditors) and you would want to discuss which one, if either, is right for you. Good luck.


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