In a Chapter 7 Bankruptcy if you are leasing a vehicle, it is not potential property of the bankruptcy estate and cannot be liquidated. If you own your car or are loaning the vehicle, we determine the amount of equity you have in it. Once determined, we use the applicable exemptions to protect $4,000 (federal) or $4,800 (Minnesota) of equity. If there is more equity than can be protected, an arrangement may need to be made with the trustee to avoid liquidation of the asset; such as a payment plan.
The automatic stay will prevent creditors from contacting you or repossessing the vehicle during your bankruptcy; this can give you a couple months of reprieve and allow you to catch up on payments or explore other vehicle options!
Chapter 13
Equity in a vehicle is much less relevant in a Chapter 13 bankruptcy. You may choose to include your car payment in your chapter 13 payment to the trustee or you can continue to make that payment directly, outside of the bankruptcy payment. If you lease your vehicle, continue to make those lease payments.
Both 7 &13
Surrendering your vehicle is always an option. It provides the option of letting go of that vehicle and the debt that is attached to it while also giving you the opportunity to find a more suitable and financially reasonable vehicle. Surrendering a vehicle before or during the bankruptcy will not penalize you because it allows the lender to retain the vehicle and for you to release that debt.
Conclusion
We absolutely understand the importance of a vehicle and want to provide you with all of your options while filing for bankruptcy! Discussing this with a Kain & Scott attorney will leave you feeling comfortable and protected as you go through the bankruptcy process.
