Will Filing for Bankruptcy Allow Me to Keep My Car?

Your car is likely one of the most valuable things you own. Not only is likely worth more money than any item you own besides your house, but it also serves a highly valuable role, helping you get to work, the doctor, and other places you need to go quickly. Without a car, you likely wouldn’t be able to work, and you’d have a very hard time caring for your children or even tending to your own needs. Many ask, Bankruptcy Allow Me to Keep My Car?

Understandably, one of the first things people are worried about when they consider filing for bankruptcy is whether they will get to keep their car. (Worrying about keeping their house, if they have one, is usually the first concern.) You’ll need to talk to a Gilbert bankruptcy attorney about your particular circumstances to know for certain how bankruptcy can impact your vehicle. However, in most cases, you can expect to be able to keep your car.

Chapter 7 Bankruptcy

You have to pass a means test in order to qualify to file for Chapter 7 bankruptcy in Mesa. You have to show that your income falls under a certain threshold and that you don’t have assets that are worth more than a certain amount. Also, under Chapter 7 bankruptcy, you can exempt some of your assets from the bankruptcy trustee if they fall under a certain value.

In Arizona, your vehicle is exempt from bankruptcy proceedings if the equity is less than $5,000 (if you are filing on your own). If you have a car that’s currently valued at $15,000, yet you still owe $13,000 on it, your equity is only $2,000, and the car is exempt under Chapter 7 bankruptcy rules. You will be able to keep that car. The exemption is $10,000 if you are disabled or you are married ($5,000 each for two vehicles or $10,000 for one vehicle).

If your car has more equity than the exemption, the bankruptcy trustee has the right to seize it and sell it to satisfy your debts. However, that doesn’t mean that’s what will happen. The trustee can also abandon the property, deciding that it’s not worth the effort to sell it, and you will be allowed to keep the car.

Because your car is a secured debt, you cannot discharge what you owe in bankruptcy. So, if you have fallen behind in payments or you have decided that you don’t want to pay on the car anymore, the only option is to let the lender repossess the vehicle. You cannot discharge the debt and keep driving the car.

Chapter 13 Bankruptcy

A Mesa Chapter 13 bankruptcy filing reorganizes your debt so that it is more affordable. If you own your vehicle outright, it should be unaffected by a Chapter 13 filing. However, if you are still paying toward your vehicle, it can be included in your repayment plan – and that may result in you paying less for the vehicle.

For example, say your vehicle is valued at $10,000, yet you still owe $13,000 on it, only that $10,000 is considered secured debt. The remaining $3,000 will be rolled into the finance plan for your unsecured debt. By the end of your repayment plan, if any of that balance is left, it is discharged.  Therefore, chapter 13 Bankruptcy Allow Me to Keep My Car.

Leased Vehicles

Typically, you would continue to pay your lease and drive your vehicle after you file for bankruptcy. Under a Chapter 7 filing in Mesa, you have to file a “Statement of Intention for Individuals Filing under Chapter 7” within 30 days to declare your desire to continue leasing the vehicle. Failure to do so could result in your vehicle being repossessed. Declaring your intent to keep the vehicle means that you continue to make payments, as well as any extra charges for going over mileage or for damages.

If you want to keep leasing your vehicle under a Mesa Chapter 13 filing, you need to discuss it with your bankruptcy attorney as the rules are bit trickier. However, you should be able to continue leasing.

Filing for bankruptcy often allows you to get maximum debt relief without stripping you of the few assets you may have. However, every case is unique, so it is important that you meet with an experienced bankruptcy attorney serving Glendale who can review your financial details and give you a clear picture of how bankruptcy can help (or how it may have a potentially negative impact in the case of assets).

Call My AZ Lawyers today to talk with a bankruptcy attorney about your options for debt relief. We help clients with both Chapter 7 bankruptcy and Chapter 13 bankruptcy. Our goal is to maximize your debt relief while also helping you keep as many of your assets as possible. We serve clients throughout the Phoenix area, including in Mesa, Glendale, and Tucson. Call us today to speak with a dedicated bankruptcy lawyer.

Arizona Offices:

Mesa Location:
1731 West Baseline Rd., Suite #100
Mesa, AZ 85202
Office: (480) 448-9800
Email: info@myazlawyers.com
Website: https://myazlawyers.com/

Glendale Location:
20325 N 51st Avenue Suite #134, Building 5
Glendale, AZ 85308
Office: (602) 509-0955

Tucson Location:
2 East Congress St., Suite #900-6A
Tucson, AZ 85701
Office: (520) 441-1450

Avondale Location:
12725 W. Indian School Rd., Ste E, #101
Avondale, AZ 85392
Office: (623) 469-6603