Jeffrey M. Rosenblum, P.C.
A Fresh Start

How can you keep your vehicle in Chapter 7 bankruptcy?

One of the primary concerns that people considering Chapter 7 bankruptcy have is whether they'll be able to keep their vehicles. After all, we rely on our cars to get to work, chauffeur the kids to school and other activities, go grocery shopping and so much more.

The good news is that there are steps you can take to keep your car in Chapter 7 bankruptcy, whether you still owe money on it or you own it free and clear. There's more than one way to do that. Let's take a look at the options.

Motion to redeem

If you have a car loan, you may be able to buy it from your lender at its current retail value. You need to file this motion with the bankruptcy court and serve your lender with it. A motion to redeem can work in your favor if the car is worth less than the remaining balance of the loan. If the court agrees, it will order the lender to take your payment.

You need to purchase the car in one payment. You also need to show that the vehicle is used for family, household and/or personal purposes. You'll also be required to submit evidence of the car's current retail value.

Reaffirmation agreement

This agreement is another option if you still owe money on your vehicle. If the lender agrees to this option, the bankruptcy court will need to approve it. You'll need to convince the court that you can continue making your loan payments. If you get a reaffirmation agreement and then fail to make your payments, your lender could repossess your vehicle.

Exempting a vehicle you own

If you purchased the vehicle with cash or have already paid off your loan and own it outright, you'll need to exempt it in the bankruptcy. You need to be sure to exempt the full value of the car. Otherwise, the bankruptcy trustee could sell the vehicle and reimburse you for your share. That means you'd lose the vehicle.

Your bankruptcy attorney can advise you of the best option given your specific situation. They can also ensure that the process is handled correctly so that you don't lose the vehicle you've sought to keep.

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