If you’re thinking about filing for bankruptcy in New York, you probably have concerns over what’s going to happen to your vehicle. You need your car to get to and from work, so it’s important that you have a plan of action for this asset. Fortunately, most people are able to keep their car and get debt relief by filing for bankruptcy. This article will explain the process to you.
How Bankruptcy and Car Loans Work in New York
There are several factors that go into whether or not you get to keep your car through the bankruptcy process. Your vehicle is considered an asset and is listed on Schedule A/B of your bankruptcy forms. But because it’s considered an asset, it’s something that creditors may pursue when trying to collect debt.
Fortunately, your vehicle may be considered an exemption that protects it from repossession. Whether or not you get to keep your car depends on the following factors:
- Whether you own, lease or finance the car
- Type of bankruptcy you’re filing
- How much the vehicle is worth
- Any exemptions that may apply
Chapter 7 Bankruptcy and Auto Loans in New York
Filing for Chapter 7 bankruptcy allows you to clear some unsecured debts, but you may have to sell some of your assets to pay back the rest. The items that may be exempt vary by state.
If you file for Chapter 7 bankruptcy in New York, you are allowed to keep your car whether you have equity in it or not. However, the amount of equity that is allowed is limited and depends on whether you are using New York bankruptcy exemptions or federal bankruptcy exemptions.
For example, if you are using New York bankruptcy exemptions, you’re allowed up to $4,425 in equity. New York also has a “wildcard” exemption that you can use to protect your car or another asset, though you will need to qualify.
If you are using federal bankruptcy exemptions, you’ll be allowed $3,775 in equity. While it is less than New York bankruptcy exemptions, you may be eligible for additional wildcard exemptions, providing you qualify for them. To determine what is best, speak with an experienced bankruptcy attorney in New York.
Chapter 13 Bankruptcy and Auto Loans in New York
New York Chapter 13 bankruptcy works a bit differently from Chapter 7 bankruptcy. Rather than liquidating your assets to repay creditors, you’ll be put on a repayment plan. Your finances are reorganized and you’ll repay your debts over the next 3 to 5 years. If you own your car free and clear, you can keep it.
If you cannot afford to keep the car or pay for repairs, you’ll have to surrender the vehicle back to the lender. This does have credit consequences, so it’s not ideal. However, the hope is that with Chapter 13 bankruptcy, you can reduce your auto loan payments. If you can catch up on what you owe, you can keep the vehicle.
What if You Can’t Afford Your Car Payments?
If you’re unable to catch up on the car payments, and you don’t want or need your car anymore, you can give the car back to the lender. This can be done because bankruptcy breaks the original contract. You only have to pay if you want to keep the car.
However, it’s important to know that bankruptcy will not eliminate the lien placed on the car. This lien gives the bank the right to take back your vehicle if you can’t make the payments. Once your bankruptcy case is over – or potentially sooner depending on the court – the bank can use the lien to repossess your vehicle, even if you erased all your debt.
Bottom line: If you don’t want the car, you can give it back and you’re no longer responsible for the payments. If you want the car, you’ll need to pay for it.
Schedule a Consultation with a New York City Bankruptcy Lawyer
To learn more about filing for bankruptcy and either keeping or giving up your car, schedule a free consultation with New York bankruptcy lawyer William Waldner. Mr. Waldner will look over your case and determine which chapter of bankruptcy is right for you. In addition, Mr. Walder will watch out for your best interests, ensuring that your debts are discharged and your assets are protected.