Can A Lender Put A Lein On A Financed Vehicle What Happens to Your Car When Filing Chapter 7 Bankruptcy?

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What Happens to Your Car When Filing Chapter 7 Bankruptcy?

Many people filing Chapter 7 bankruptcy wonder what will happen to their property when they enter the process. Some people believe that the bankruptcy trustee will seize everything and sell it to give to the creditors. This is completely untrue because an individual could not get a fresh start from their bankruptcy filing if they lost all their property, especially their car. How can a person get to work if their car was sold out from underneath them? Depending on the state in which someone resides, there are different bankruptcy exemption laws that protect different amounts. In today’s economy, the values of personal property have declined severely making it harder for a bankruptcy trustee to sell property that is not exempt.

If someone had a car valued at $10,000 and $5000 was exempt, would it be worth it to a bankruptcy trustee to sell the car at auction and maybe receive $6000 for it. The net proceeds would only be $1000 for all the time and effort they put in. This is why they will rarely waste their time unless it’s some kind of vintage automobile or an exotic car of value. This is another reason why it’s best to let a bankruptcy attorney worry about how to protect an individual’s property. They will know the ins and outs of what the local trustee requires and what property values are acceptable to have a successful bankruptcy discharge.

The other side of the coin is what happens to automobiles in a Chapter 7 bankruptcy that are financed. This is simple, if you can afford it, you can keep it. Most lenders will require the individual to fill out a reaffirmation agreement, reaffirming the debt with the lender. All this is making a promise that you will continue to pay on it after the bankruptcy discharge. This is also the time to let that lemon go. When you are upside down on a car or the car is a piece of junk that you owe a bunch of money on, surrender it back to the lender and discharge the liability when filing Chapter 7 bankruptcy. Call the bankruptcy attorney and have them get a hold of the lien holder to surrender the property. Many people make the mistake of hanging on to a car they really can’t afford.

They have this idea that they need the car so they will reaffirm it and try to keep paying. The problem with this logic is once an individual signs a reaffirmation agreement they are liable to lead into that contract. They will not be able to add this to the bankruptcy filing at a later time in the process. In other words if they can afford it, the creditor will come after them and they will have no protection as they won’t be able to file bankruptcy for another seven years.

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