With the possible exception of your home, your car is usually your most important asset. You need it to get to work, buy groceries, take your child to their doctor appointment, etc. When you file a chapter 7 bankruptcy, you may be able to keep your car, but that depends are a number of factors.
When You Have a Loan on Your Car in MN
If you have a loan on your car, your car lender may ask that you sign a reaffirmation agreement. This agreement is basically a new car loan contract, and unless you’re required to sign it, I wouldn’t advise it. If allowed by your car lender, as long as you keep making your monthly car payments on time, and keep it insured, you won’t lose your car.
When Your Car is Leased in Minnesota
If you have a lease on your car and want to keep making payments, you can. You have the option to assume or reject the lease. And, if you assume the lease, then you’re expected to keep making your on-time monthly payments. But, similar to a reaffirmation agreement, beware of signing any assumption agreement if asked by the car dealership.
When You Own Your Car
If you own your car free and clear, then I may be able to apply the law to protect its full equity. In Minnesota, I’m allowed to protect up to $5,000 for one car. So, if your car is worth $4,000, don’t worry about losing it since that amount falls within the exemption amount. But, let’s say your car is worth $8,000. Here, a trustee will likely sell your car at auction and then pay back your creditors with any proceeds.
Getting a Car During Chapter 7 Bankruptcy in MN
If you need a car during an active chapter 7 bankruptcy, it’s possible to obtain one – either by paying cash in full or obtaining a new car loan. But, beware of higher interest rates a car lender might apply if you’re still in your bankruptcy. It would be preferable to purchase or obtain a car loan after your bankruptcy is complete.
CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
And, if you’re thinking of filing for bankruptcy, and or if you have questions or are ready to get your life back, reach out to Minnesota’s nicest bankruptcy law firm by going to www.lifebacklaw.com. You won’t regret it!
