This blog entries will dispel common myths and educate you on the general process of bankruptcy in Florida.
QUESTION: Will I Lose My Car if I file Bankruptcy?
For many people, their car is their prized possession. The decision to file Chapter 7 bankruptcy (liquidation) or Chapter 13 reorganization often is determined by your vehicle(s). One of the benefits in filing consumer bankruptcy (either Chapter 7 or Chapter 13) is the automatic stay goes into effect once your case is filed and all collection activity must stop including repossession. If your car has been repossessed (and not yet sold by your finance company) and you file bankruptcy, then the finance company must return your car. Additionally, if you file Chapter 7 bankruptcy, you can sign a reaffirmation agreement with your finance company and keep your car. If your car payment is too high, you also can surrender your car to your finance company and the finance company cannot pursue you for any deficiency claims.
However, if your car is paid off or you only owe a small amount to your finance company, you may have to pay the Chapter 7 trustee the amount of equity in your car to retain your vehicle as in a Chapter 7 bankruptcy you are only allowed to exempt $1,000 ($2,000 if a husband and wife file) of equity (what your car is worth after you deduct what amount you owe to your finance company) in your vehicle.
If you have too much equity in your vehicle, you may have to file a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, you have to pay back the equity in your assets over a 3 to 5 year period. Lastly, one of the benefits of a Chapter 13 bankruptcy is that you may be able to “cram down” your car (i.e. reduce the amount of your loan to the fair market value of your car) if your car is worth less than what you owe to the finance company and you have owned the car for at least 910 days.
For more information, please contact the experienced bankruptcy attorneys at The Wallace Law Group with convenient office locations in Boynton Beach, Sunrise, Aventura and Downtown Miami.