A concern for many people needing to file bankruptcy is what do I do about a vehicle. There are more options than you might think.
First, I will discuss cases where the Debtor's vehicle has a vehicle loan. A vehicle loan is a secured debt. When you file chapter 7, you must file a statement of intentions advising the court and the creditor of your intentions regarding the debt secured by the vehicle. The options include Reaffirm, Redeem, or Surrender.
Reaffirm means to keep the vehicle and continue to make the payments as you were before you filed bankruptcy. This is a good option for people that have a decent interest rate and do not owe more than the vehicle's value. Although, it is possible to negotiate a lower interest rate with the creditor. If the Debtor is “upside down” or owes more than the value of the vehicle a good option is to Redeem.
Redeem means to pay the lender the value of the vehicle in exchange for the clear title. For example, if you have a vehicle worth $10,000.00 but you owe $15,000.00, you can pay the creditor $10,000.00 and the car is paid off. I know what you are thinking, if I had $10,000.00, I would not be filing bankruptcy. Well, some people take money out of retirement to pay the redemption. If that is not an option, there are lending companies that will give you a loan for the $10,000.00 and now you only owe $10,000.00 on your vehicle instead of $15,000.00 and you may also have a lower monthly payment. If your car is not eligible for a redemption loan, as the lenders have criteria on age and mileage of the vehicle, you can surrender the vehicle and they may give you a loan to replace your vehicle.
Surrender means to give the collateral to the lender and discharge the debt. This is a good option for people who do not want their vehicle any longer, owe way more than the value of the vehicle, can no longer drive, or no longer need the vehicle. It is possible to surrender the vehicle and obtain a new vehicle. We can refer you to a lender that will give you a loan for a different vehicle.
One last issue that may arise with a vehicle when filing chapter 7 is when the value of the vehicle is more than what you are allowed to exempt or keep. The standard exemption for a vehicle in Florida is $1,000.00. If you do not own a home, you are allowed an additional $4,000.00 that can be used on any personal property, including a vehicle. If you have not lived in Florida for two years, you will have different exemptions, depending on where you moved from and how long you have lived there. Sometimes, the options are better, so if you have not lived in Florida for two years and are contemplating bankruptcy, you should consult with an attorney who can advise you if you are better off filing prior to the two year mark or waiting until after the two year mark.
If you have a car with a lot of equity or that is paid off, you may be able to get a loan to buy-back the vehicle from the trustee. A chapter 7 trustee's job is to liquidate any assets that are not exempt and split the funds between the unsecured creditors. If your vehicle is worth $10,000.00 and you can only exempt $1,000.00, then the trustee will sell the vehicle and you will get the first $1,000.00 from the sale. Alternatively, you can buy-back the non-exempt portion, $9,000.00, from the trustee. This is often a good option if you have a way to pay the $9,000.00 or get a loan for the $9,000.00 as in exchange, you are discharging all your unsecured debt.
If you need to file a chapter 7 bankruptcy, the attorneys at Holland Law Group will advise you of your options with regard to your vehicle and help you determine what the best course of action for your particular circumstance. All cases are different and if you are considering a bankruptcy, you need a knowledgeable attorney to get you the best result. Our goal at the Holland Law Group is to get you the best fresh start possible.