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What happens to my car in bankruptcy?

When you have to file for bankruptcy, a lot of concerns go through your mind and one important issue is what will happen to your car. As one of your most important possessions, it can be critical for continuing to work and rebuilding your finances and credit. The good news is that it is possible to keep possession of your vehicle during and after the bankruptcy process.

Automatic stay

Under a Chapter 13 bankruptcy filing, creditors are automatically prevented from collecting and repossessing a vehicle from you as part of the process, even if you have not kept up on payments. This makes sure the disruption to your life is minimal while awaiting approval for your repayment plan. You will have to make what are called "adequate protection" payments to cover its depreciation in order to keep the vehicle. If your car was repossessed before proceedings began, it makes things a bit more complicated.

Motion for turnover

If you begin the bankruptcy process and your vehicle has already been repossessed because of nonpayment, it is possible to have the car returned. You can file a motion for turnover, which would state that the vehicle is essential for your household. In this case, you would also need to pay adequate protection payments after you get the vehicle back. It is also possible that the motion would not need to be filed if your lender agrees to return the car when the repayment plan is approved by the judge.

Consider all your options

It is understandable to want everything in your life to stay much the same during bankruptcy. However, if your car was not affordable and contributed to needing to file bankruptcy, the best option may not be keeping the car. It is advisable to explore different courses of action with your lawyer and a financial advisor to find out what outcome would be best for your overall situation.

Loan reduction (cramdown)

Another option to explore is known as a "cramdown". It essentially reduces your car loan to market value. This could be beneficial if you owe more than the car is worth, but law now restricts the use of this reduction to at least 910 days after you bought the car to prevent abuse of loan reductions.

Keeping your vehicle during bankruptcy can be done. By using the automatic stay in bankruptcy protection and making sure you get a good plan in place that will let you continue paying for the vehicle, there is no reason for you to have to walk because you have filed bankruptcy. If you have questions about bankruptcy or concerns about auto repossession, contact Mark T Young & Associates at 423-933-1606. We can discuss your situation and debt relief options that can help.

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
Phone: 423-933-1606
Fax: 423-877-0363
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