Besides your home, your car is often your most necessary asset. People are concerned that they may lose it if they file. However, in most cases, people in bankruptcy can keep their car as a part of their fresh start.
If you own the vehicle outright (i.e. you paid off the loan) then the issue is simple. There are exemptions you can use to protect the value (trade-in or “wholesale”) of your car (net of any loan balances there may be). In most instances, these exemptions are enough to protect the car, especially if you still owe a balance on the car loan.
Three Options for Your Car
If you still owe money to a finance company or bank for a loan taken out to buy the car, then things get a little more involved. Under the Bankruptcy Code, you have one of three (3) choices when it comes to the car and the loan:
- you can turn in the car with no liability for a repossession deficiency down the road (not really a practical option for most people, as they do need the car);
- pay off the loan, or redeem it (also not practical, unless there is a small remaining balance); or
- reaffirm the debt, which would result in the car loan not being wiped out by the bankruptcy (“discharged”), and if the car gets repossessed after the bankruptcy is over, you would be responsible for any deficiency after its sale.
Naturally, this last one should only be done after careful discussion with a lawyer.
Sometimes It's None of the Above
Some banks do not require that you take any action, and are happy as long as you make the payments. This option is called “pay and ride,” and was available to everyone prior to the 2005 changes to the bankruptcy code. If your bank offers this, great; otherwise, you are left with one of those three choices.
So What Do I Do?
If you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.