Cars & Bankruptcy

If you are considering filing for bankruptcy, one of your biggest concerns is likely what happens to your property. What happens to your primary car and another other cars depends on which type of bankruptcy you file, whether you have a loan on the car, and whether you are behind on payments. The good news is exemptions in Chapter 7 bankruptcy can allow you to keep a modest car, while Chapter 13 can help you keep a car and even avoid repossession and cure a default if you have missed payments.

Cars & Chapter 7 Bankruptcy

If you own your vehicle outright with no lien or loans remaining, your car may be protected from a forced sale or repossession through an exemption. Be sure to determine the fair market value for your vehicle. This is the amount of equity you have if there is no loan. The net step is determining the Nevada motor vehicle exemption amount in Chapter 7. Nevada has two sets of exemptions you can use: System 1 or System 2. Under System 1, you can exempt up to $2,900 of the equity in your car while System 2 allows you to exempt up to $5,100 in auto equity. You can also use the wildcard exemption toward your car if you have more equity than either limit.

If you have a car loan…

Chapter 7 is designed to eliminate unsecured debts, but it can also offer protection for secured debts like your car if you have a loan. If you have a loan on the car, you have a few options:

• Surrender the car. If you cannot afford the monthly payments or you owe more than the car is worth, you can choose to surrender the car and discharge the debt in Chapter 7.
• Reaffirm the debt. A reaffirmation agreement between you and your lender means you agree to pay the balance you owe on the car loan, despite the bankruptcy. You will continue to make your car loan payments and the lender will not repossess. The reaffirmed debt will survive bankruptcy.
• Redeem the car. You also have the option of redeeming or buying the car from your lender through a lump sum payment equal to the car’s fair market value, regardless of how much you owe. This may be a good option if you owe more than the car is worth and can afford to pay for it to discharge the remaining balance.

Cars & Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to protect your car and other assets from repossession. If you are behind on loan payments, filing Chapter 13 can stop repossession and give you a way to cure the default. If you already own the vehicle with no loan on it, your car is typically fully protected in a Chapter 13 case.

If you purchased the vehicle within 910 days of filing, you may be required to repay the full car loan amount. If this is the case, the interest you will pay on the loan may be greatly reduced.

Another option is a cram-down. If you bought the car at least 910 days before filing for bankruptcy, you will only need to repay the fair market value for the car and the rest of the loan amount will be discharged.

Contact a Bankruptcy Lawyer in Las Vegas

If you want to keep your car or stop repossession through bankruptcy, an experienced Las Vegas bankruptcy lawyer can help you explore your options and determine the best ways to protect your assets. Contact Las Vegas BK for a free consultation with a Nevada bankruptcy attorney to discuss your case.