If Ideclare bankruptcy and am paying car payments on a vehicle and own another, will they take either car?

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If Ideclare bankruptcy and am paying car payments on a vehicle and own another, will they take either car?

Asked on January 8, 2012 under Bankruptcy Law, North Carolina

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

There is no easy answer:

1) Much depends on what kind of bankruptcy you file.  In Chapter 7, your assets are considered available for sale or other dispossal for the benefit of creditors; but in Chapter 13, your assets are not collected and sold for creditors.

2) If you are making car payments in vehicle 1, then the lender for  those payments should have a security interest in the vehicle which gives them first call on it. If the net equity in the vehicle is considerable--i.e. it's worth a lot more than the balance of the loan--then it may be worthwhile to be considered for collection and sale in Chapter 7, since even after paying off what's left of the loan, the other creditors can still recover money. If there's little equity in it, then they would not do this, presumably.

3) The vehicle you own outright, however, could certainly be an asset which is taken during a Chapater 7 bankruptcy.

Whether to file bankruptcy, which kind to file, and how best to shield your assets are complex questions; you would be well-advised to consult with a bankruptcy attorney before doing anything.


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