Wondering if you can keep your car when you file for bankruptcy in New York? This is a very common question New York residents have, especially since having a vehicle is a necessity for most people.
At Grady BK, PLLC, we understand how important it is for you to keep your car when you file for bankruptcy. That is why we will work with you one-on-one so that you can move forward with peace of mind and complete confidence. In this article, we will discuss if you can keep your car when you file for bankruptcy and what this process looks like when you file for Chapter 7 or Chapter 13.
What Will Happen to Your Car if You File For Bankruptcy in New York?
If you want to keep your car when you file for Chapter 7 or Chapter 13 bankruptcy, the good news is that this is usually possible. In fact, the vast majority of New York residents who file for bankruptcy can keep their vehicle, whether they own it outright or have an active car loan.
Especially for those dealing with serious financial problems, filing for bankruptcy can actually help you protect your car. This is because an automatic stay immediately takes effect when you file for bankruptcy, which protects you from all collection actions from creditors. So, you may even be able to use bankruptcy to stop a car repossession if you have fallen behind on your car loan.
Understanding the Motor Vehicle Bankruptcy Exemption
New York has very generous bankruptcy exemptions that help to shield certain types of assets from going towards your outstanding debt. Specifically, New York has a motor vehicle exemption that you can apply directly to your car’s equity.
Equity is the value of your property minus what you still owe on it, which you can determine by estimating the value of your vehicle. For instance, if your car is worth $15,000 and you still owe $10,000 on your car loan, $5,000 is your car’s equity.
The New York motor vehicle bankruptcy exemption covers up to $5,500 in car equity. For vehicles equipped for disabled drivers, this exemption goes up to $13,625.
Keep in mind that you should consider both the New York exemptions as well as the federal exemptions. Although you can’t use both exemptions at the same time, reviewing each option can help you decide on the best fit for your bankruptcy needs.
New York also has some additional exemptions you can take advantage of, especially if you have a high-value car. An attorney can help you determine what exemptions you qualify for and how you can use them.
How Does Chapter 7 and Chapter 13 Treat Your Car?
Anyone considering bankruptcy needs to understand how Chapter 7 and Chapter 13 bankruptcy work, especially if your goal is to keep your car. These are two of the most common bankruptcy options in New York, but they have several key differences that set them apart.
Here is an overview of what Chapter 7 and Chapter 13 bankruptcy are and how they treat vehicles:
- Chapter 7: This is the fastest bankruptcy option that helps to eliminate all dischargeable debts. And in many cases, you keep your car when you file for Chapter 7, even if you own your car outright. If you still owe on your car, you can use the motor vehicle exemption to cover your car’s equity. However, if there aren’t enough exemptions to protect your vehicle, you may not want to file a chapter 7 bankruptcy.
- Chapter 13: This is a repayment plan type of bankruptcy that allows you to pay off your debt over a 3 to 5 year period. Chapter 13 always allows you to keep your vehicle. You can either pay your car loan directly on your own or the car payments can be added to your repayment plan. This type of bankruptcy also allows you to catch up on past-due payments without the risk of losing your vehicle.
Keep in mind that every bankruptcy case is unique, so you should consult with a bankruptcy attorney to determine how you should move forward.
FAQ Section
Can I keep a paid-off car if I file bankruptcy?
Yes. Both Chapter 7 and Chapter 13 will usually allow you to keep your car, even if it’s paid off.
What happens to my car loan in Chapter 7?
You can usually use New York’s motor vehicle bankruptcy exemption or the federal exemptions to cover the equity of your car.
Can Chapter 13 help if I’m behind on my car payment?
Chapter 13 is the best option if you have fallen behind on your car payments. The past-due payments, as well as your normal monthly payment, will be added to your repayment plan, allowing you to catch up while maintaining your financial obligations.
What happens if my car is worth more than the exemption amount?
In some cases, if there is equity in your vehicle that can not be protected with the available exemptions you would not want to file a chapter 7 bankruptcy, rather you would file a chapter 13 bankruptcy so that you can keep your vehicle.
Can bankruptcy stop a vehicle repossession?
Usually, yes. The automatic stay stops all collection efforts, which includes vehicle repossession.
New York’s Top Compassionate Bankruptcy Attorney
Even if you’re in a situation where you need to file for bankruptcy, you most likely don’t want to give up your car. At Grady BK, PLLC, we understand how overwhelming the bankruptcy process can feel, which is why we strive to provide complete clarity so that you know exactly what to expect. Having the help of a bankruptcy attorney in New York ensures you choose the right bankruptcy option that allows you to keep your vehicle, no matter your specific situation.
At Grady BK, PLLC, we are here to help whether you have already started the bankruptcy process or you’re still deciding on the best option. Our attorneys treat each and every one of our clients as though they were our only client, providing the personalized representation you need.
Contact us today at 315-299-9005 to discuss your situation with a bankruptcy attorney in New York. Our team at Grady BK, PLLC, is here to address any questions or concerns you may have.
