If you are considering or preparing to file a Chapter 7 bankruptcy you should know that you will have three options for what to do with your vehicle. Once you have considered your options, your North Carolina bankruptcy attorney will then have to file a Statement of Intention to inform the court what you plan on doing. Keep reading to find out more about how you can handle your car.
Let it go
Your first option when handling a vehicle during bankruptcy is to simply let it go. Under this option the debtor must surrender the property to the lender and this surrender will be considered satisfaction for the debt. Once you have surrendered the car, the creditor will not be able to come after you for the difference between what you owed and what the car was worth. This is because a Chapter 7 bankruptcy works by wiping away your personal debts, including what you might have owed on the surrendered vehicle.
If you love it and are not ready to part with it, you can also choose to reaffirm the debt on your vehicle. To do this, you must enter into what is known as a “reaffirmation agreement” with the creditor, which essentially removes the vehicle (and its corresponding debt) from the bankruptcy process. A judge must approve the terms of the reaffirmation agreement to ensure that it is in your best interest and that you will have the resources to pay the loan. However, should you fail to make payments as scheduled in the new agreement, the car can be taken and the creditor can sue you for the amount you owe after the car has been sold. This means reaffirmation can be a risky proposition if you are not positive you will have the income to keep up with payments.
Pay for it
A third option for those in a Chapter 7 bankruptcy looking to keep their car is to pay the creditor the fair market value for the vehicle in a lump sum cash payment, this is known as redemption. This means that if you owe $20,000 on the car and it is worth $12,000, you’ll have to find a way to come up with the $12,000 to pay the creditor and get your car.
If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC today at (704) 370-2828. As professionals who are experienced in the bankruptcy arena, our attorneys will provide you with the best advice for your particular situation.
“Keeping Your Car in Bankruptcy,” by David Haynes, published at Bankruptcy.About.com.
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