If I file bankruptcy, what happens to the vehicles that I am making payments on?
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If I file bankruptcy, what happens to the vehicles that I am making payments on?
Asked on November 3, 2014 under Bankruptcy Law, California
Answers:
S.L,. Member, California Bar / FreeAdvice Contributing Attorney
Answered 9 years ago | Contributor
If you are filing Chapter 7 bankruptcy, you can either keep the vehicles and continue making payments by reaffirming the debts by including a Statement of Intention in your bankruptcy. You also mail a copy of the Statement of Intention to your lender. When reaffirming a debt, the terms of your payments are negotiable and your lender might offer you a better deal than you currently have.
If you decide to surrender the vehicles to the lender, this is called redemption. You will need to file your Statement of Intention with your bankruptcy and mail a copy of the Statement of Intention to your lender. This clears you of further liability on the debt after your bankruptcy.
If you are leasing the car, you can get out of the lease by rejecting the lease on your Statement of Intention.
Another option is to keep the car through redemption by paying the trustee a lump sum for the current value of the car, not the amount you owe on your loan balance. Due to depreciation, the current value of the car may be considerably less than the amount you owe on the loan.
If you are filing Chapter 13 bankruptcy, you will have a plan (budget) for repayment of your creditors.
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