Chapter 7 bankruptcy will eliminate unsecured debt such as credit cards and medical bills. However, most clients are interested to find out what they get to keep if they file bankruptcy. In most cases clients get to keep everything they owned before bankruptcy. Of particular interest is whether or not a client can keep their car, truck, or motorcycle.
Again, the answer to this question for most clients is that they can likely keep their automovile. If you own your car outright (no financing) and the value of the car does not exceed the exemption limits for your state, you should not have any problem with keeping the car. However, if your car is financed you will have to take a few additional steps to keep the car. Because car loans are considered secured loans, they are unaffected by a Chapter 7 bankruptcy filing. Thus, in order to maintain the same car and its accompanying loan, a debtor must reaffirm the loan in bankruptcy to emerge from bankruptcy as owner of the vehicle. In many cases, the reaffirmation agreement can include more favorable terms than the original agreement including a lower interest rate or forgiven payments. However, most car lenders (Toyota, Ford, GM) refuse to negotiate these loans with an individual who has defaulted on the loan.
Each bankruptcy district has varying rules on Chapter 7 bankruptcy agreements. If you are represented by an attorney ask them to review the reaffirmation agreement and in most cases they will have to sign off on the agreement. If you are considering bankruptcy, be sure to ask whether a reaffirmation agreement makes sense for you and the process to reaffirm the debt. For more information about bankruptcy and reaffirmation agreements in California, Arizona, and Utah contact our office right away.
Our firm is dedicated to helping clients file bankruptcy, obtain loan modifications, and helping clients get a fresh start. For more information on what First Source Law can do for you, please fill out our free evaluations for bankruptcy and loan modifications.
This post was written by Benjamin Yrungaray
Benjamin Yrungaray handles bankruptcy and loan modification cases at First Source Law. He is a member of the state bars of California (#256224), Pennsylvania (#208558), and New Jersey. He is also admitted in the Central District Court of California, Southern District of California, and New Jersey District Court.