If you own a car-free and clear, the exemption laws (the laws that protect people’s basic property) allow you to keep up to two cars with a value of $7,500, or $10,500 if you are over 60 or disabled. If it is a joint case, you can double that amount.
If you owe money on your car you have several options. If you are current and the car is insured, you can generally keep it if you simply keep making the payments and if the equity in the car is less than the above numbers. For example, if the car is worth $10,000 and you owe $7,500, you have $2500 in equity, which is fully protected.
If you want to keep a financed car, some creditors demand you sign a reaffirmation agreement which we do not recommend because that ties you to the debt no matter what happens with the car in the future. Most creditors will allow you to keep the car without a reaffirmation agreement if you stay current with the payment and keep it insured. Sometimes you have to make the payments manually instead of online after filing, but check with the bank as to how they want to handle it.
The other option if you are in a car loan that is upside down (you owe $10,000 and the car is only worth $4,000), you can return the car through bankruptcy and will owe the creditor nothing.
The problem then becomes, “How do I get another car?”. As I explained in another blog post, getting a car loan after filing is generally pretty easy if you have a good income source. There are some car brokers out there who specialize in getting loans for people who file, and we at Mile High Bankruptcy can provide an excellent referral if you need it.
If you wish to discuss this, give me, Peter Milwid, a call at 303-831-0733.
