What If the Bank Doesn't Take a Vehicle After Bankruptcy?
- Chapter 7 bankruptcy, the most common type of protection, requires that you liquidate your assets and use the money to pay down your debts. Chapter 13 bankruptcy avoids liquidation, and instead restructures payment schedules. Generally, Chapter 7 is used when there is no hope of fulfilling most debt obligations, and Chapter 13 is useful when you still have money coming in (you are still employed or have work) and will eventually be able to pay all your debts in full if given more time and reduced interest or debt amounts.
- Filing Chapter 7 exemptions can stop a pending repossession and protect you from having to include your car when liquidating assets. Your options under Chapter 7 include keeping your car and continuing to make payments, paying off the car loan in full (under bankruptcy laws, you don't need to pay the debt in full, only the value of the car), or you can turn the car over to your creditors.
- If you own your car and it is paid in full, you can keep it and it will be protected under Chapter 13. For car loans that are less than 910 days old, you would usually continue to make payments on the loan at a negotiated reduced interest rate. For loans more than 910 days old, you may be able to pay for the current value of the car, rather than the amount of the loan.
- If you lost your car due to bankruptcy, but you need one for work, there is a good chance that you will be able to get an auto loan. Auto loans are "secured" loans, using the car as collateral against the loan. Getting an auto loan can also help rebuild your credit. You may be required to obtain authorization from the trustee of the bankruptcy to be eligible for an auto loan if you have filed for Chapter 13 bankruptcy.