Articles Posted in Cars & Vehicles

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When you file bankruptcy all, if not most, of your debts are discharged, which means you are no longer responsible for them. A Reaffirmation Agreement is a brand new agreement or contract between you and your creditor in which you voluntarily choose to remain liable for the debt after you receive your bankruptcy discharge. The terms of the Reaffirmation Agreement are generally exactly the same as the terms of your original contract. There are two major types of debts that you most likely will have to sign a Reaffirmation Agreement for if you wish to keep the property secured by the debt. These two types of debts are car loans and mortgages.

Ok, so you filed bankruptcy. Your vehicle is financed and you believe that by filing bankruptcy it will be much easier to continue making your car payments. When you are contacted by the finance company about reaffirming the car loan, you do so without hesitation. However, a month or two into the reaffirmation agreement, you realize that it is still very difficult to make the monthly payments and decide it would be a better decision to surrender the vehicle and purchase a new vehicle with lower monthly payments. Can you change your mind and rescind the Reaffirmation Agreement? The answer is, as usual in the legal field, possibly and it depends. Continue reading →

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When you file a Jacksonville Bankruptcy, you are required by the United States Bankruptcy Code to list all of your assets in your Bankruptcy Petition. The reason being is to assist the Court, and your appointed Trustee, in figuring out which of your assets you are allowed to keep, and which of your assets you must turn over to your Bankruptcy Estate. The assets surrendered to your Bankruptcy Estate are liquidated to pay your creditors. If there is an asset you wish to keep, then you must accurately list that asset in your Bankruptcy Petition as well as the exemption (if applicable) that allows you to retain the asset.

The biggest hurdle is figuring out what your assets are and what exemptions are available to you. By definition, an asset is anything that has a value and that which can be sold or liquidated in order to pay your debts or commitments. The most common looked over assets are whole life insurance policies, as well as insurance policies in which you are the named beneficiary, accrued or unused vacation pay, timeshares, season tickets, unpaid insurance claims, security deposits, class action lawsuits, trademarks, liquor licenses, divorce settlements and tax refunds.

I cannot stress to you enough the importance of disclosing all of your assets. One accidental omission could have devastating consequences. Take this situation as an example:

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carmini-150x150While it is true that the exemptions allowed in Florida only allow you to keep $1,000.00 of equity in a motor vehicle, most people who file bankruptcy in Jacksonville, Florida get to keep their vehicles. This is because financed or leased vehicles can just about always be kept by simply continuing to make your normal monthly payments as if the bankruptcy was never filed. This is of course as long as the vehicle is a reasonable necessity for your, or your dependents’, care and support.

What if my vehicle has equity?

A different set of rules applies however when your vehicle has equity that is above the $1,000.00 exemption that is allowed in Florida. For example, when you owe your vehicle free and clear. In such a situation, you might be able to use a wild card exemption to protect the rest of the equity. However, if you are unable to exempt all of the equity, then you may be forced to surrender the vehicle or pay your Trustee the un-exempt equity amount in order to keep the vehicle. Most of the time, your Trustee will allow you to make monthly payments for the equity.

There are two tests that the Trustee will do in deciding if you should keep your vehicle. The first is to determine whether it is feasible. Meaning, if the monthly payments are reasonable and affordable for you. The second and more significant test when keeping the vehicle is whether it is in the “best interest of your creditors.” United States Bankruptcy Code 11 U.S.C. § 1129(a)(7)(A)(ii) states that in a Chapter 13 Bankruptcy, your creditors must receive, at the very least, the amount they would have received had you filed a Chapter 7 Bankruptcy. As an illustration, if you own a motorcycle and wish to keep it in your Chapter 13 Bankruptcy, then if that motorcycle would have been liquidated in a Chapter 7 Bankruptcy, then you will either have to surrender the motorcycle or pay the value of it through your Chapter 13 Plan. Continue reading →

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One of the best benefits of declaring a Chapter 13 bankruptcy in Jacksonville, Florida is the ability to “Cram Down” certain assets such as a car loan, certain real estate debts, or even some personal property. A cram down allows debtors to lower the principal balance and interest rates on debts they owe on secured debts. A Jacksonville Bankruptcy Attorney can help you determine if any of your debts might be eligible for a cram down through bankruptcy.

So how does an asset qualify for a cram down? First, the debt must be a secured loan. A debt is a secured loan when a lender has a security interest in the asset or collateral. This interest grants the lender certain rights to the asset, such as the right of repossession of the item if the debtor defaults on his or her payments. The most common type of security interests are found in cars and houses.

A cram down can occur when a person declares a Chapter 13 Bankruptcy. Unlike a Chapter 7 Bankruptcy, this type of bankruptcy requires that the debtor pays back his or her debts through a repayment program, which lasts 3 to 5 years.   It is important to note that a person’s homestead property does not qualify for this benefit. Continue reading →

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kia_rioOne major concern clients have when making the difficult decision of whether or not to file for bankruptcy is their primary means of transportation; in other words, their motor vehicle. In most cities in the United States, having a vehicle can make the difference between being able to get to work consistently and maintain employment or not. Having a reliable means of transportation can be your lifeline. Attorneys receive many questions such as, “Do I get to keep my vehicle if I file bankruptcy?” and, “Will I be able to purchase a new vehicle.” Unfortunately, the answer is always, “It depends.” But what does it depend on?

One of the main considerations taken into account when your Trustee decides whether or not you get to keep your vehicle is whether your vehicle has any equity in it. The next consideration is whether or not you have exempted that equity. In Florida, you are only allowed to exempt $1,000.00 of equity in a motor vehicle per debtor. However, there could be other ways to protect more equity. If you are leasing your vehicle or took out a car loan to purchase that vehicle, and you currently owe your lender the full value of the vehicle or owe more than the vehicle is worth, then you can most likely keep the vehicle simply by reaffirming the lease or loan. Continue reading →

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repoIf your vehicle has recently been repossessed, a Chapter 13 Bankruptcy might help you get your vehicle back! Chapter 13 Bankruptcy is a reorganization of your debts, which requires a monthly payment plan for up to 5 years. If you file bankruptcy soon enough after the repossession of your vehicle and the vehicle has not yet been resold or auctioned off, the automatic stay that goes into place as soon as a bankruptcy is filed will prevent the creditor who repossessed your vehicle from taking any further actions to collect the debt, which includes preventing them from being able to sell your vehicle.

If you are able to file a Chapter 13 before your vehicle is sold, your next step is to file a Chapter 13 Plan that shows that you are not only able to begin making your monthly car payments again, but that you will bring your car payments current through the Plan. If this is the case, your vehicle should be released back to you. You must also be able to show the bankruptcy court that the vehicle is a necessity and that you can afford your monthly payments by providing documentation of your income.

In a lot of instances once your vehicle’s lender receives notice of the bankruptcy as well as the Chapter 13 Plan (which shows that they will be adequately protected), the lender should willingly release your vehicle back to you. However, this is not always the case. If your lender refuses to return your vehicle to you, you will then need to ask the court for help. If you have proven that your vehicle is a necessity, that your Chapter 13 Plan gives the lender adequate protection, and that the vehicle is insured, the court should order your lender to return your vehicle to you.

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kia_rioA Chapter 13 Bankruptcy lasts for 5 years and a lot can happen in that time! You started bankruptcy with a car that was in good running condition and you thought it would last for at least the duration of your bankruptcy, but all of a sudden it breaks down and is extremely expensive to fix. The cost to fix the vehicle is just about what the car is worth!!! You decide it would be a smarter decision to just get a new car, but you would have to obtain financing and wonder if you can acquire a new car loan while still in your Chapter 13 Bankruptcy? In addition, you have also been informed that you must first obtain the court’s permission; is this true? The answer is you may possibly be able to obtain a new car loan, but there are a few additional steps to complete first, and then yes, you will need to motion for the court’s permission.

The key to being able to obtain a new car loan while in a Chapter 13 Bankruptcy is demonstrating to the court and trustee that it is absolutely necessary, that the cost of the new vehicle is reasonable and that the interest rate is fair. For example, you need a reliable car to get back and forth to work in order to make your Chapter 13 Plan Payments, but that luxury vehicle is not an essential. Your trustee understands this and wants to help you successfully complete your Chapter 13 Bankruptcy, but will not allow you to set yourself up for failure by obtaining a car loan you can’t afford. In other words, as long as the new car loan payments do not affect your Chapter 13 Plan Payments, then your trustee will most likely allow you to obtain the new debt.

Sine it can be difficult to obtain a loan from a conventional lender while still in bankruptcy (most do not understand the process of obtaining a loan while in bankruptcy or just do not want to take the risk), you will most likely need to contact a lender who specializes in financing for those who are in bankruptcy. They will need documentation from the court in order to provide you with the needed financing.

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original.0Most likely yes. Regardless of whether you file a Chapter 7 or a Chapter 13 Bankruptcy and this is why.

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.

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Jacksonville Bankruptcy AttorneyMany times, when someone wants to make a large purchase, like a house or a car, they may need to have someone co-sign the loan with them. Simply put, a co-signer is someone who is making a promise to the creditor to repay a loan if the primary borrower cannot pay and defaults on the loan. We all know that if the primary borrower defaults (or files bankruptcy), the co-signer will be required to pay the loan back in its entirety. But what happens when it’s the co-signer who has filed for bankruptcy? How will that affect the primary borrower?

The best way to describe the situation is with an example. Picture this: Charlie is in the market for a new car, but can only qualify for a loan if he has a co-signer. His friend David agrees to be a co-signer on the land, but he will not be listed on the title as the owner of the car. Sometime later, David files for bankruptcy and is no longer required to pay the car loan. What happens to Charlie?

Charle, as the primary borrower, still has to pay the balance of the loan. Now, when Charlie pays off the loan, there will be no liens on his car, and the car will be titled in his name as the owner. The only difference between being a primary borrower and a co-borrower in an auto finance contract is who the car eventually belongs to after the loan has been paid. Thus, when David, the co-borrower, filed for bankruptcy, that amounts to a breach of the loan agreement and it could be considered default. The creditor, however, now has only one person to look to for the repayment of the loan.

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Keeping a Car in BankruptcyFiling a Chapter 7 bankruptcy can be used to save your car under limited circumstances, but it is possible. In Chapter 7, a debtor only has three options when it comes to deciding what do to with their personal property covered by a lien. Once you and your bankruptcy attorney decide which option is best, your attorney will file a “Statement of Intention” with the bankruptcy court to let everyone know what your intend to do with regard to your secured collateral. Here are your options:

1. Surrender

The first option is to surrender the property to the car lender in full satisfaction of the debt. The car lender can never come after you for the difference between what the car sold at auction and what you owe on the note. In normal situations, if you owe $10,000 on a car that gets repossessed, and the lender can only get $6,000 for it at auction, the car lender can sue you for the remaining $4,000 on the note. Because a Chapter 7 bankruptcy wipes out your personal liability on your debts, your lender will never be able to come after you for the deficiency.

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