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Vehicles and Bankruptcy

Vehicles and Bankruptcy

If you are stuck in debt, you should consider filing for personal bankruptcy, which helps clear away your debts. Personal bankruptcy includes two types, Chapter 7 and Chapter 13.

While Chapter 7 means liquidating some of your assets if you have any that exceed the limits on value, Chapter 13 implies repayment of debts from your future income. If you are considering filing for bankruptcy, you must be concerned about what happens to your vehicle through the bankruptcy process. The fate of your car ultimately depends upon the type of bankruptcy filed by you and the equity present in the vehicle.

Can you keep your vehicle after filing for bankruptcy?

To save your vehicle through the bankruptcy process, you need to be aware of several factors that could have a say on it. The car is always regarded as an asset and is of utility value. The trustee and creditors can investigate this aspect to determine how much of their debt will be paid. The vehicle may also be counted under an exemption, thus safeguarding it from repossession if the lender agrees to accept future payments from the debtor. The factors that help to retain the vehicle are varied, and they are as follows:

  • The type of bankruptcy being filed
  • The value or cost of the vehicle
  • The nature of exemptions that are applied to a place where one lives

What happens to your vehicle in a Chapter 7 bankruptcy?

In chapter 7 bankruptcy car creditors often pressure a debtor to sign a new contract wherein the debtor will be personally liable should future payments fall delinquent. Creditors often threaten to take the car even while the debtor is current on the payments. This creates a dilemma for debtors who wish to maintain possession of their vehicles, especially when they need the car for work transportation.

What happens to your car in Chapter 13 bankruptcy?

Chapter 13 bankruptcy is somewhat different from Chapter 7. It does not liquidate non-exempt assets for repayment to creditors. You will instead enter a debt repayment plan. Your property may be protected from repossession by way of Chapter 13 bankruptcy. A reorganization case will ensure that your finances are reorganized to enable you to begin the process of repayment. If you own a vehicle outright, you will be able to retain or keep it.

If you would like more information about how bankruptcy can help you, contact an Elk Grove bankruptcy attorney.

Selling Personal Property and Bankruptcy

Selling Personal Property and Bankruptcy

When someone is considering bankruptcy, they may worry they will lose their assets such as vehicles, homes, jewelry, etc. Many times, debtors sell some of their property to pay for their bankruptcy attorney or bankruptcy fees. There are a few guidelines and rules you should follow if you sell the property to a family member just before your bankruptcy case to avoid negative actions such as the dismissal of your bankruptcy case or being charged with bankruptcy fraud.

Selling Nonexempt Property

You can sell your nonexempt property during bankruptcy if you meet certain specific requirements:

  • You needed the money for necessities such as housing, food, utilities
  • You sold the property at fair market value
  • You kept excellent records of the transaction
  • You obtained trustee and court permission beforehand

If you have documented the reasons and can show that you needed the money for necessities, you can avoid any issues with the bankruptcy court. If you use the money for any other purpose, you should speak to a bankruptcy attorney before selling the property to ensure that you are legally able to do so.

Chapter 7 Bankruptcy

When you file Chapter 7 bankruptcy, you will submit paperwork declaring your exempt and nonexempt property. The bankruptcy trustee will evaluate your nonexempt property and determine if it could be sold to satisfy your debts to your creditors. Since the bankruptcy trustee will sell the property, there is no reason for you to sell it if you do not need it for necessities.

Avoiding Bankruptcy Fraud

If you try to hide any previous transactions in the past three to five years before your bankruptcy, you may risk penalties such as dismissing your case, paying restitution, or serving jail time for fraud.

Contacting a Citrus Heights bankruptcy attorney will help you navigate the complicated laws of your bankruptcy case.

Vehicle Repossessions and Bankruptcy

Vehicle Repossessions and Bankruptcy

Having easy access to a vehicle is essential for most of us to get to our jobs, schools, grocery store, etc. Therefore, having a vehicle payment is the most common type of consumer secured debt. Since it is a secured debt, the lender has the right to repossess the vehicle if you get behind in your payments. Sometimes as early as one missed payment, although that rarely happens. Contacting a bankruptcy attorney can stop the legal process and help you decide if filing bankruptcy is the best course of action for you.

Repossession Process

It's relatively easier for the lender to repossess the vehicle than it is for a mortgage company to foreclose on your home or the credit card companies to take legal action against your bank accounts. A lender can come onto your property, hook the vehicle up to a truck, and haul it away. In some states, you are required to maintain vehicle insurance at all times. If you lose coverage of your vehicle from your insurance company, your finance company can legally take possession of your car.

After the first missed payment, you will usually receive a letter or a phone call reminding you to make a payment. According to your contract, there may also be a late fee included. If you fail to catch up on the payments, the lender may act to come on your property day or night and repossess the vehicle.

Cannot Enter your Closed Garage

A lender or a third party acting on behalf of the lender can come on your property to take the vehicle, but they cannot enter a closed garage without your permission. They are also not allowed to use force or threaten you. If these laws are violated, you have the right to seek legal damages against the lender or the third party. Any property that was inside your vehicle at the time of the seizure is still your property. The lender must make every effort to protect your belongings and let you know where you can retrieve it.

If you do not catch up on the payments, the lender can decide if it wants to sell the vehicle. The lender is required by law to let you know when and where your vehicle will be sold at auction. You can choose to bid on your car. The sale must be commercially reasonable and not sold below the fair market price. If the lender sells the vehicle far below the fair market price, you may be able to claim damages against the lender and dispute any deficiency judgments you would be responsible for the remaining balance of the loan.

If you are behind in your vehicle payments and worried your car would be repossessed, contact an Elk Grove bankruptcy attorney to stop any repossessions or other legal actions taken against you.

Bankruptcy and Your Assets

Bankruptcy and Your Assets

When you file chapter 13 bankruptcy, you have the opportunity to keep your assets during a “reorganization” where you offer a fair payment to creditors in return for maintaining your property. Chapter 7 is a little different; while you may keep your assets if you have if they are low enough value to fit into the legal exemption laws provided for chapter 7 bankruptcy, the trustee may sell high-value assets that don’t fit within the exemptions to satisfy your creditors.

Exemptions

No matter what type of bankruptcy you file, bankruptcy law allows for exemptions (property that is protected from seizure). States differ in what the exemptions are, and if your state allows it, you may be able to claim the federal exemptions if they are more favorable to your situation.

Exempt does not mean you no longer have to pay for the asset. You will need to continue to make any mortgage or car loan payments if you wish to keep the collateral. The exemption rule applies to your ability to preserve a certain value of assets from liquidation by the trustee.

Fresh Start

Bankruptcy was not intended to leave you homeless and broke. The law allows you to keep your possessions if they of reasonable value so you will not have to start over from scratch. Once your debt is eliminated, you will have more of your income to pay your living expenses and not be burdened by overwhelming debt.

If you have questions about exemptions and your assets in bankruptcy, contact a Folsom bankruptcy attorney to find out how you can get a fresh start.

Getting Your Car Back After Bankruptcy

Getting Your Car Back After Bankruptcy

If you fall behind on your car payments, and you believe your vehicle is about to be repossessed, one of the first things you should do is remove any personal items out of your car. Sometimes personal belongings can vanish from your car at the impound lot. If you leave necessary items in your vehicle such as a spare tire, or children's car seats, it is a good idea to take pictures of them just in case they are not there when you go to retrieve either the car or your items.

A creditor does not have the right to keep your personal items when the car is repossessed. It is against the law for them to refuse to give you back your property after you have asked for it. As soon as you can, the quicker, the better, send a letter listing the property that you are demanding that they return.

Wrongful Repossessions

Sometimes, a creditor has no legal right to take the car, or they do not follow correct procedures when seizing your car. If this has occurred, you have the right to get your car back and be paid monetary damages.

Negotiate With the Creditor

If your car has a minimum resale value, the creditor might work with you so you can get the car back after repossession. The creditor may agree to the original payment plan, or allow for a different one to better fit your needs.

Redeeming a Vehicle

After your vehicle is repossessed, you can redeem the car by paying off the whole debt in one lump sum. Getting a breakdown from the lender on how much you owe should include a refund for unearned interest and insurance charges you are owed since the debt has been paid off early.

Reinstate the Contract

Some states allow you to recover the repossessed car and pay only the back due payments and not the total loan on the car. You may have to make one or two payments in advance and cover the cost of the tow and storage.

Bankruptcy Can Get Your Car Back

If you have other financial problems as well as losing your car to repossession, it may be a good financial choice for you to file for bankruptcy. If the lender has not sold the car when you file, the lender should voluntarily return the car due to you because of your legal right to the automatic stay. The automatic stay stops all legal action against you while you work out your bankruptcy plan.

When you get your car back, you will have to continue to make the payments if you wish to keep the car. Since you will have qualifying debts eliminated in bankruptcy, you should be in a better position to make the payments.

For more information on bankruptcy, contact an Elk Grove bankruptcy attorney.

Can I Sell Personal Property Before Bankruptcy

Can I Sell Personal Property Before Bankruptcy

In Chapter 7 bankruptcy, the nonexempt assets are sold, and the proceeds go to pay your creditors. Both federal and state laws allow the court to void an asset sale that was made just prior to filing for bankruptcy. If the court determines that the assets were sold or transferred to avoid having them be included in the liquidation process, you may be held liable.

When you file for bankruptcy, the court-appointed trustee will ask the debtor if they have traded, sold or transferred property within the last two years. Some states can go back as far as six years. The trustee is looking for fraud concerning your bankruptcy.

Types of Fraud

Actual fraud; where the debtor intended to delay, hinder or defraud a creditor.
Constructive fraud; when the debtor received less than fair market value during the time the debtor was insolvent.

Exempt Property

Talking to your Citrus Heights bankruptcy attorney can help you evaluate whether you are at risk of penalties involved in what the court considers an improper sale of your assets. Much of your assets may be exempt and will not be included in the bankruptcy process. To be safe, don't make any transfers shortly before filing.

Don't Leave Anything Out

Be honest with your attorney and explain any past and recent sales or transfers. Looking at your case, filing a Chapter 13 bankruptcy instead of Chapter 7 may be in your best interest if you have such transfers to declare. The trustee does not liquidate your assets in a Chapter 13 bankruptcy, but instead, you must follow a court-approved repayment plan on your past due debt. When you have finished making your payments, some remaining past due debts can be eliminated.

The issue can become complicated, especially if you sold items to be able to make other more relevant payments. A Citrus Heights bankruptcy attorney will have the experience you need to help minimize any problems that may arise during your bankruptcy.