What’s going to happen to my car in a Chapter 7 bankruptcy?

It depends on your situation and what you want to happen to your car. There are two possible scenarios:

Scenario 1: You are CURRENT on your vehicle payments.

Goal: Keep the vehicle.

You should: Keep making the payments, maintain insurance on the vehicle, and the bankruptcy will not affect your ownership of the vehicle.

Goal: Surrender the vehicle

You should: Stop making payments, maintain insurance on the vehicle, and be prepared for the lender to repossess the vehicle once either 1) they get relief from the bankruptcy stay (which lenders rarely seek), or 2) they bankruptcy stay is lifted – roughly 4 months from the date of your bankruptcy filing.

The big positive with this option is that you can save the money you would otherwise be making in vehicle payments and use that money to pay the sales tax or down payment on a different vehicle post bankruptcy. You can essentially drive the old vehicle until the bankruptcy stay is lifted and then move on with your newer vehicle.

Scenario 2: You are NOT CURRENT on your vehicle payments

Goal: Keep the vehicle

You should: Option 1 – Use the time during which you are protected by the bankruptcy stay (approximately 4 months from the date of filing bankruptcy) to get current on your vehicle. You also need to maintain insurance at all times per state law.

Option 2 – Investigate whether you are able to Redeem (buy back) your car for the fair market value instead of what you owe on it. There are lenders who can lend you the fair market value of your car – essentially creating a new post-bankruptcy loan. We can help you investigate redemption and whether that is a good option for you.

Goal: Surrender the vehicle

You should: This is exactly the same as if you are current on your vehicle – stop making payments, maintain insurance on the vehicle, and be prepared for the lender to repossess the vehicle once either 1) they get relief from the bankruptcy stay (which lenders rarely seek), or 2) they bankruptcy stay is lifted – roughly 4 months from the date of your bankruptcy filing.

A local St. Louis bankruptcy attorney from The Law Office of Tracy A. Brown, P.C. can help you understand all aspects of your current financial situation and your debt relief options. We can help make the process of filing for bankruptcy protection as easy as possible. To Free Your Future From Your Past contact us for a FREE consultation with a licensed attorney.