You are an honest debtor but for various reasons have lost control over your finances and are behind in your car payments. You have decided that filing Chapter 7 bankruptcy today is the best option for a better life tomorrow. However, you need your car for work and you are concerned that if you lose your car to bankruptcy, you will find yourself in an even worse situation. Fortunately for you, it is quite possible to file Chapter 7 bankruptcy and keep your car.
Because you are behind in your car payments you maybe in danger of having your car repossessed. However, when you file for bankruptcy, an automatic stay of all collection activities against you will go into effect. This will suspend all creditor actions against you for the duration of the bankruptcy proceedings and allow you time to pursue a few different options for keeping your car.
There are several ways to keep your car under Chapter 7 bankruptcy:
Surrender your car and go cheaper
Firstly, if you feel like your car isn’t worth what you owe or that you will not be able to make the payments even after the discharge, you can surrender your car to the loan company without having to pay anything else. Then while you rebuild your credit, you can find something affordable just to get you back and forth to work until you are able to afford something better.
Redeem your car from the loan company
Secondly, it is a little known fact that under Chapter 7 bankruptcy you have the option of “redeeming” your car from the loan company. This means making a lump sum payment to your loan company for what your car is actually worth, instead of what you owe on it. Provided that you have the cash, this can be a huge advantage to you if you owe more for your car than what its worth. If you don’t have the cash, which is highly likely if you are filing for bankruptcy, there are a number of companies that provide financing specifically for “vehicle redemptions”. You maybe able to find financing terms that will allow you to significantly lower your monthly payments and keep your car.
Reaffirm your loan with the loan company
Thirdly, if you can get caught up on your car payments and your income shows that you will be capable of making your payments after the bankruptcy, you can “reaffirm” your auto loan by signing a “reaffirmation agreement” with your loan company. This will allow you to continue to make the payments and keep your car. However, if you fail to make the payments in the future, your loan company will be able to employ whatever legal means at their disposal to collect the debt, and this time you will not be able to file bankruptcy to stop the repossession.
Use your motor vehicle exemption
Lastly, if you happen to owe nothing on your car and it is worth $7500 or less, you can use the Oklahoma motor vehicle exemption to protect your car during bankruptcy. You are allowed a $7500 exemption per person or a $15,000 exemption per married couple for a single vehicle. If your vehicle is worth more than the exemption allows, you can keep the car but will owe the court the difference. If you cannot pay the difference, the court can sell the car for what it is worth and give you back the amount of your exemption.
As you can see, there are number of ways to file Chapter 7 and keep you car. Each option has its advantages and disadvantages and each bankruptcy case has its own particulars. So, there is no one size fits all solution. Ultimately, the choice you make to keep your car or not, should take into account whether you can really afford a car, if you will be able to make the payments and how much equity you have in the vehicle.