If there is no loan on the vehicle, you may be able to retain it, depending on its value and the exemptions available to you. Exemption law is governed by both state and federal statutes. Depending on your state of residence, you may be eligible for federal or state tax exemptions, or you may be limited to your state's exemption laws. This article will not delve further into this topic, but you should be aware that an exemption may enable you to keep a car you own outright.
So what if you have an auto loan? First, some fundamentals of debt. In general, there are two distinct types of debt, and each is handled differently in bankruptcy. Debt can be secured or unsecured. Secured debt is debt that is backed by a piece of property, or is secured by that property. If you fail to repay the debt, the creditor can seize the collateral, which is the property you pledged as security. Unsecured debt is debt that is not backed by collateral or property. A vehicle loan is an illustration of secured debt. The loan is the debt owed to the bank, and the automobile is the collateral. If you default on the loan, the bank will seize the vehicle. The credit card statement is an illustration of an unsecured debt. This debt is unsecured, so if you fail to pay your credit card account, the credit card company has no automatic right to repossess any particular item.
A automotive loan is therefore secured debt. In accordance with the bankruptcy code, we have three options for handling secured debt. These alternatives include (1) surrender, (2) redemption, and (3) reaffirm.
It sounds exactly like ""surrender"" You may surrender the vehicle to the trustee, and you will no longer be required to pay the loan associated with it. No longer are you personally liable for the loan. Currently, you no longer possess the car.
Reaffirmation sounds similar to what it is. Essentially, you will execute a reaffirmation agreement with the bank holding the auto loan to confirm that you will continue making payments on the vehicle. This agreement outlines a new loan and repayment schedule that will withstand the bankruptcy. This reaffirmed loan remains after your debts are discharged in bankruptcy, and you must now make payments. You can retain the vehicle, but new payments must be made.
Redemption is the final option. To redeem property in bankruptcy, you essentially make a single payment for the property's fair market value. It is the car in this instance. Therefore, you make a single payment for the car's fair market value, and then you own it outright. You are permitted to make the payment based on the fair market value, which is noteworthy. Therefore, this is excellent if you have a large auto loan and the vehicle is not worth very much. You essentially squeezed the loan down to the value of the collateral and then repaid it in one lump sum. But how can a bankrupt individual make a substantial one-time payment for the fair market value? Where do they obtain their funds? The correct response is that redemption is effective for severely depreciated property. Items such as computers and domestic electronics that you wish to retain. These items are ordinarily not very expensive to begin with, and they depreciate in value very rapidly. For example, the computer you purchased a year ago is likely obsolete. Therefore, if you had a loan secured by the computer, the value of the computer would likely be significantly less than the value of the collateral, in this instance the computer. Therefore, a redemption payment makes logic. Perhaps not, depending on the vehicle. Also, and this may come as a revelation to some readers, there is an entire cottage industry that lends money to bankrupt individuals for the express purpose of making a redemption payment. Consequently, if you want to make a large redemption payment on the car, you may be able to obtain a loan for it, oddly enough, even if you are in the midst of a bankruptcy. In addition to exemption requirements, the code specifies a number of other prerequisites for making a redemption payment, including that the property being redeemed must be exempt.
In bankruptcy, surrendering, reaffirming, and redeeming property are extremely complex processes, and consultation with an experienced bankruptcy attorney is advised. In a chapter 7 bankruptcy, there are options that allow you to retain your car if necessary, and this article provides a very basic overview of those options.
" - https://www.affordablecebu.com/
