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Yes, you can keep your car if you file for bankruptcy, but it may depend on the exemptions in your state and the type of bankruptcy filed.
If you have questions regarding the exemptions available to you and which bankruptcy Chapter you should file, a bankruptcy lawyer in Asheville may be able to help. They can review your case and provide legal and financial guidance.
You Can Keep Your Car Under Certain Conditions
In most cases, individuals or families who file for Chapter 7 bankruptcy can keep their assets, including their personal cars. Many states, including North and South Carolina, offer exemptions for motor vehicles. This allows each adult to keep their vehicle, but exemptions may vary based on such conditions as:
- The equity in the vehicle is under the exemption amount
- The value of the vehicle is under a certain amount
- They own the car outright or are current on payments.
- They make a payment arrangement before filing for bankruptcy.
A bankruptcy lawyer can clarify which exemptions apply to your case.
Understanding Bankruptcy Exemptions
A bankruptcy exemption is a law that allows filers to protect certain personal property from being sold and the assets being distributed to creditors. There is usually a modest exemption limit on the value of your vehicle. For example:
- North Carolina: The exemption on motor vehicles is $3,500, per G.S. § 1C-1601. However, it is unavailable if the vehicle was purchased 90 days before you filed for bankruptcy.
- South Carolina: The motor vehicle exemption, per S.C. Ann. § 15-41-30, is based on equity. Equity is the difference between the car’s value and what is owed. The value of equity is $5,000 (with adjustments for inflation).
When a state has a “wildcard” exemption, such as South Carolina, you can add any unused exemptions toward the value of your vehicle. When an exemption applies, you will be able to keep your van, car, truck, or another personal vehicle if:
- You are up to date on payments, or the vehicle is paid for.
- The exemption covers the net value of your vehicle.
- You want to keep making payments if you still owe on the car.
You will be able to include this information on your bankruptcy petition. If you petition for Chapter 7 bankruptcy with your spouse, you will likely each be able to protect one vehicle of modest value under your state’s exemptions.
You May Have Other Options If Your Car Is Worth More Than the Exemption
It may be possible to use your state’s “wildcard” exemption to cover the value of your car above the motor vehicle exemption amount. Alternatively, there may be a way to pay your bankruptcy trustee the difference to keep your vehicle.
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What If You Still Owe on Your Car?
Unlike some other types of bankruptcy, there is no option to refinance and catch up on payments under Chapter 7 bankruptcy, as the U.S. Courts explain. You will need to work out a payment plan with the financing company before filing your petition for bankruptcy if you are behind on your payments but hope to keep your car.
If you do not, the loan will likely be listed for discharge, prompting them to repossess the vehicle.
You can also consider other options, including:
Keeping the Car Loan
Called reaffirmation, this option lets you agree to continue making payments on the existing car loan. Usually nothing changes with the loan terms, and you just keep paying as you would have otherwise. It may also be possible to ask the finance company to refinance or restructure your payments instead of including the vehicle in the bankruptcy and trying to discharge the debt.
Refinancing the Car Loan
Known as redemption, you can pay the car dealership or finance company the vehicle’s value and own it outright. If you have the money to do this, it may be a good option—especially if you owe a significant amount on the vehicle. Some lenders specialize in helping people obtain new loans for this purpose.
Some of these options rely on the finance company agreeing to work with you. A bankruptcy attorney from our law firm may be able to give you advice on which could work best for you and how to approach it.
A Chapter 7 Bankruptcy Attorney Can Offer Advice and Guidance
Keeping their vehicle is a top concern for many people considering bankruptcy. You need your car to get to work, buy groceries, take your children to school, and more. Losing access to transportation could impact many aspects of your life. If you have concerns about keeping your vehicle through Chapter 7, you can contact a bankruptcy attorney who can walk you through filing and protecting your exempt assets.
In most cases, individuals and families in North Carolina and South Carolina who file Chapter 7 bankruptcy can retain their assets. Most people in this financial situation have few if any, non-exempt assets. This means their bankruptcy will discharge their qualifying debts, and they will retain their assets, including their vehicles.
Other Types of Bankruptcy Filings
Chapter 7 bankruptcy is not the only option for filing personal bankruptcy. Working with an attorney on our legal team can help you understand the differences between Chapters and determine which best addresses your needs, such as:
- Chapter 13 allows individuals to reorganize their debts within a pay period
- Chapter 11 allows companies to do reorganize and restructure their debts in order to keep operating
- Chapter 12 bankruptcy is for family farmers
Working with our law firm to prepare and petition for bankruptcy can greatly reduce your stress since we can offer advice to make the bankruptcy process go smoother and provide guidance. We can also address your questions and ensure you take the right steps to protect your vehicle and other assets you hope to keep.
Enlist the Help of Our Chapter 7 Bankruptcy Attorneys Today
Our bankruptcy lawyers at Farmer & Morris Law, PLLC, understand how much your car means to you. We can help you take steps to keep it while getting your debts discharged through Chapter 7 bankruptcy.
We serve clients in Western North Carolina and Upstate South Carolina with offices located in Rutherfordton, Morganton, Hendersonville, and Shelby, North Carolina as well as Spartanburg, South Carolina.
You can reach out to our team now for a free initial consultation. We will explain our services, fee structure, and more when you connect with us.
