You may need to learn more about car loans and bankruptcy in New York if you are considering taking the step of filing for bankruptcy. This decision will impact many things, including large financial commitments, such as cars that you are still paying for.
At Grady BK, PLLC, our goal is to provide our clients with the expert and personalized representation they need as they navigate car loans and bankruptcy in New York. We understand how overwhelming this can be, which is why we will help you with every step of the process, ensuring you can proceed with confidence. In this article, we will be discussing the impact of bankruptcy on auto loans in NY, and whether or not you will lose your car in Chapter 7 or Chapter 13 bankruptcy.
Will You Lose Your Car When You File For Bankruptcy?
When it comes to car loans and bankruptcy in New York, you have to understand how bankruptcy views vehicles. In bankruptcy proceedings, any vehicles are considered to be assets, which can put them at risk, especially if you owe money on them. However, it is still possible for individuals who are filing for bankruptcy to keep their vehicles.
Whether or not this is possible is dependent on several different factors, such as:
- The type of bankruptcy you are filing for
- The value of the vehicle
- If you are up-to-date on your loan payments
- Whether you own, are leasing, or financing the vehicle
Another factor that can impact your ability to keep your vehicle is the car equity exemption in bankruptcy NY. According to New York’s bankruptcy exemptions, you are allowed up to $5500 in equity, which you can use to keep a vehicle that you are paying on.
Because there are many different factors that can impact a car loan during bankruptcy in New York, you need to hire a New York bankruptcy attorney. An attorney will be up-to-date with the local bankruptcy laws and can help you find the best course of action so that you can keep your vehicle.
Treatment of Car Loans in Chapter 7 vs. Chapter 13
The two most common types of bankruptcy are Chapter 7 and Chapter 13 bankruptcy. Chapter 7 is a faster option designed for those with lower incomes, allowing them to get out of debt in a matter of months so that they can start with a clean slate. On the other hand, Chapter 13 is a repayment type of bankruptcy that allows you to repay your creditors over a 3 to 5-year period.
Generally speaking, Chapter 13 car loan repayment is the safest option as it almost always guarantees that you can keep your vehicle. Your car loan payments will be added to your repayment plan, so you can continue paying your car off like normal.
But, depending on your income, you may not qualify for Chapter 13, or you may want to address debt faster. In that case, you may want to file for Chapter 7 bankruptcy. If you do decide to file for Chapter 7, you will need to create a plan so that you do not lose your vehicle in this process.
Here are some ways you can approach filing for Chapter 7 while keeping your vehicle:
- Reaffirm: Reaffirmation is an agreement that you will continue to pay off your car loan as if you didn’t file for bankruptcy. It essentially reestablishes your commitment to paying off the loan.
- Surrender: If your vehicle is not an absolute necessity, you may want to consider surrendering it to the lender, especially if the loan exceeds the car’s total value.
- Redeeming: Car loan redemption is an option that allows you to pay your vehicle’s current market value in a lump sum instead of paying off the total loan balance. This is usually an option if the value of the vehicle is much lower than the total loan balance.
How to Protect Your Car in Bankruptcy
To avoid car repossession when filing for bankruptcy, there are certain steps you can take ahead of time. The number one thing you need to do if you are planning on filing for bankruptcy but have an auto loan is to stay current on your payments. This needs to be a top priority, as staying current significantly increases the likelihood that you can keep your vehicle, whether you file for Chapter 7 or Chapter 13 bankruptcy.
You may also want to consider negotiating with your vehicle lender to see if they will adjust the terms of your loan. They may agree to do this, which can help you continue to pay off your vehicle even if you file for bankruptcy.
It is also helpful to get the assistance of a New York bankruptcy attorney, as they can help you look into additional options to protect your vehicle.
FAQ:
Can I keep my financed car if I file Chapter 7 in NY?
In many instances, you can keep your financed car when filing Chapter 7 as long as you are current on the payments and the equity is within the exemption limit.
What happens to my car loan in Chapter 13?
Your monthly car loan payment will be added to your repayment plan, so you can continue paying off your vehicle.
New York’s Top Compassionate Bankruptcy Attorney
Even if you are filing for bankruptcy in New York, it may still be possible to keep certain assets, such as your vehicles, even if you have a car loan. At Grady BK, PLLC, we strive to provide all of our clients with the personalized legal representation they need as they navigate bankruptcy. We will work with you one-on-one to determine the best type of bankruptcy for your situation so that you can keep your vehicle.
At Grady BK, PLLC, our legal approach focuses on each individual client, ensuring you get the one-on-one support you need. We are here to answer your questions throughout the bankruptcy process so that you can make the best decisions that support your future financial goals.
Contact us today at 315-299-9005 to discuss your financial situation with a New York bankruptcy attorney. Our team at Grady BK, PLLC, is here to help as you begin the process of filing for bankruptcy with a car loan.
