Chapter 7 Bankruptcy
When you file a Chapter 7 Bankruptcy with a leased or financed vehicle, you simply need to reaffirm the debt in order to keep it. If you are current on your monthly payments, you simply continue to make your payments and the vehicle lessor or financer will provide you with a Reaffirmation Agreement for you to sign. Once executed, it will be filed with the court. By reaffirming the debt, you are agreeing to remain liable for the full amount you still owe on the vehicle despite filing bankruptcy.
Being able to keep a leased or financed vehicle in a Chapter 7 Bankruptcy is cut and dry when you owe what the vehicle is worth or owe more than the vehicle is worth. If you owe less than the vehicle is worth then you have equity in the vehicle that the Trustee will most likely want in order to give to your unsecured creditors. You are allowed to exempt $1,000.00 of equity in a motor vehicle. If this exemption amount is not enough to cover the full amount of your equity, you will have to pay the Trustee the remaining equity in order to keep the vehicle. Bankruptcy law allows you up to twelve months to pay the full amount.
Chapter 13 Bankruptcy
When you file a Chapter 13 Bankruptcy with a leased or financed vehicle, you simply continue to make your monthly payments either inside or outside of your Chapter 13 Plan. If you are current on your payments, your payment amount will not change. But if you are behind on your monthly payments, you can bring them current through you Chapter 13 Plan, which will increase your monthly car payments until you are current.
As with a Chapter 7 Bankruptcy, if you owe what the vehicle is with or more than it is worth, you will not have to pay the Trustee additional money in order to keep the vehicle. But if there is equity in the vehicle, you will have to pay the Trustee the full equity amount above the allowed exemption of $1,000.00 in order to keep the vehicle.
If you are considering filing bankruptcy, it is important to first consult with an experienced bankruptcy attorney to find out how you may be able to keep your leased or financed vehicle along with any other assets you may have. Contact the Law Office of David M. Goldman, PLLC today at (904) 685-1200.