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Can You Keep Your Car In Chapter 13 Bankruptcy?

October 24th, 2016 | By

One of the biggest fears for people filing for bankruptcy is that they will lose all of their possessions. However, in most cases, filing for bankruptcy does not automatically mean you will have to surrender things like your vehicles or your home. Generally speaking, in a Chapter 13 bankruptcy filing, you keep your property, but have to pay down a certain amount of your debt, on a court-approved repayment plan. Depending on certain factors like the equity of your car, payment history, and payment amounts, you can preserve your vehicle.

In today’s age, having a car can be incredibly important, especially if you live in a rural or suburban environment. Being able to commute to your job, pick up the kids, and run errands can make all the difference in the world to your quality of life and ability to bounce back quickly after a bankruptcy filing in the Atlanta area. It is understandable that you would want to hang on to your car, so let’s explore the elements that go into this portion of the court’s decision.

  1. The equity in the car

For people who own an older car, a car with high mileage, or an otherwise deemed “modest vehicle”, it is much easier for that asset to be protected. These estimations are often gathered using the Kelly Blue Book value, and your attorney has the ability to “write off” a certain amount of equity in your bankruptcy, in order to cover a relatively inexpensive car. For example, an old sedan that is valued at $5,000 will likely be able to be saved, as opposed to a brand new SUV, valued at $30,000.

  1. How much you owe on the car

If you own your vehicle outright, you’re in much better shape than someone who is still making payments. Generally speaking, if you owe more on the car than its equity, it may be hard to hold onto during bankruptcy. If the car has depreciated in value but you still owe a lot of money, you also have a chance of losing it.

  1. Your monthly payments

In some cases, if you are making payments on a “reasonable” vehicle, you may be eligible for something known as a “cramdown”, which essentially lowers your interest rates and monthly payments, allowing you to pay off this debt faster. Talk to your bankruptcy attorney to see if you may qualify for this program.

To find out more about keeping your car through a Chapter 13 bankruptcy in Atlanta, contact the team at Slomka Law Firm.

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