Car Loans and Chapter 7 Bankruptcy
If you have decided to file Chapter 7 bankruptcy and you have a car loan, there are some facts to consider. First, unlike Chapter 13, Chapter 7 typically cannot discharge secured debts. Most Chapter 7 cases only eliminate debts such as credit card bills or medical bills, which are considered unsecured.
Options for Car Loans Under Chapter 7 Bankruptcy
Although car loans cannot be usually discharged under a Chapter 7 bankruptcy filing unless the filer is willing to give up his or her car, that doesn't necessarily mean you'll lose your car if you choose to file personal bankruptcy and your state's exemption laws may allow you to keep your car. There may be options to keep in mind when it comes to your car loan under a Chapter 7 bankruptcy filing, including:
- Surrender your car
- Reaffirm your car
- Redeem your car from debt
Surrendering Your Car
By surrendering your car, you are returning it back to the lender. This means you no longer have any financial obligation or personal liability as far as this car loan is concerned.
Reaffirming Your Car
Reaffirming your car means agreeing to continue paying off the car loan, despite your bankruptcy filing. This means that even though you have filed Chapter 7 bankruptcy for your unsecured debt, you still claim responsibility for the car loan.
Redeeming Your Car
The decision to redeem your car means you are willing to pay the fair market value of the vehicle to the lender. This option could be very attractive to the debtor if he or she owes more on the loan than the car is currently worth. The only catch is that by choosing this option, the individual must be able to pay the amount due in one lump sum.
Consult an Attorney Near You
For more details on your specific circumstances and the Chapter 7 bankruptcy laws in your state, connect with a lawyer today. Just fill out the form below to get started.