Bankruptcy is a declaration by law that a debtor or organization cannot afford to pay its lenders or debts. Filing for bankruptcy is regulated primarily by laws that fall within the jurisdiction of the federal government. Bankruptcy claims and exemptions are legally valid under national law and vary from one state to another.
The Different Types of Bankruptcy
There are six different types of bankruptcy within the United States code for this issue. The most commonly used for individuals are the following:
- Chapter 7: This type of bankruptcy is known as “liquidation” or “new start” bankruptcy. It allows all eligible debts to be completely excluded, but not assets. Most Chapter 7 bankruptcy cases are non-active. This essentially means that the assigned trustee will determine that there are no assets (vehicles or homes) for settlement for the benefit of the creditors.
- Chapter 13: This type of bankruptcy is often called acquired wages bankruptcy. A payment plan will be created where debts will be consolidated at a reasonable monthly payment figure. This will allow you to catch up on the insured debts through a proportional payment and after 36 to 60 months of making payments what is left of the debt will be eliminated.
Saving the Car After Bankruptcy
Many people who want to go bankrupt have one of the most critical issues in mind, namely whether they can keep their car. Possession of a car is an unconditional requirement for a large number of people. Upon filing a Chapter 7 bankruptcy, there are ways to maintain your vehicle.
- Reaffirmation Agreement – This option does not apply to people who already own their car, but can be the first option for those who are making payments on their vehicle. A reaffirmation agreement means that a contract must be made to assume the debt related to the car loan. This means that if the car loan payment is breached after entering into the reaffirmation agreement, the lender can repossess the car. This agreement demands the approval of the court.
- Motion to Redeem – This is the option to buy a car in cash from the lender at the sale value of the car at the time of bankruptcy. This may be a good option if the value of the car is much less than the loan amount. To be entitled to redemption, the car must be used for personal, family, or domestic purposes. You also have to pay for the car in one payment. A motion must be filed to redeem the bankruptcy court, in accordance with its internal regulations. Proof of the current sale value of the car must be provided to the court. If the court agrees, it will grant the petition and order the car lender to accept a one-time payment. After being paid, the lender will make a transfer of the title to the owner of the vehicle, free and clear. Filing a motion can be complicated and it is recommended that you consult with a bankruptcy attorney if this option is being considered.
Hire a Qualified Bankruptcy Attorney
If you are considering bankruptcy and are concerned about whether you will be able to keep your vehicle or not, contact the attorneys at Lankford & Moore Law today to schedule a consultation. We will help you understand your legal options and what is best for your situation.