For people living near Memphis, bankruptcy can be a concerning financial event. The status of your car during bankruptcy can make a significant difference in the next steps, especially if you need your car for work, childcare, and other key day-to-day tasks.
Chapter 7 Bankruptcy and Cars
The car is an asset like a house or other item that you own. Whether you get to keep it or not, and where it goes, depends on a few several factors. First, if you are behind on your payments, the lender can take the car and repossess it. You may be able to get back on track with the loan by making regular payments again or by paying off the remaining balance all at once. If you are up to date on the loan, you might be able to keep the car. If the remaining balance on the loan minus your equity in the car is below a certain level (this level varies by state) you are allowed to keep it under what is called a bankruptcy exemption.
Next Steps
Sometimes, even if the car is above the exemption level, the bankruptcy trustee will allow you to pay off the rest and keep the car so you can use it, especially if it is your only means of getting to work. Otherwise, the car will be sold off and used to pay your debts as part of the bankruptcy process. There is always room to try to negotiate these outcomes with the lender and/or the trustee.
Bankruptcy can take several different paths, some of which allow you to keep your car and others do not.