If you have an expensive monthly car payment you can no longer afford, then Chapter 7 bankruptcy can help by wiping out your debt, including that high car loan, and give you a new start. Here are a couple of things to think about if you’re worried about not having a car after bankruptcy:
Get rid of a high car payment and buy a new car post-bankruptcy. Businessweek reported that auto loans in the second quarter of 2012 were up more than 5 percent in comparison with the same period a year ago, with “riskier” buyers accounting for almost half of the total number of buyers. This means you have a very good chance of buying a car with affordable loan payments after going through bankruptcy. Too many people who need to go through bankruptcy don’t do it because they’re afraid they’ll walk away with nothing.
Get out of an underwater car loan through bankruptcy. Check sites such as Kelley Blue Book to find out what your car is worth. If you owe more on it than it is worth (like a lot of people who finance or lease new cars), then perhaps you don’t want to keep it if you go through bankruptcy. It doesn’t make a whole lot of sense to keep struggling with car payments on a car that isn’t worth what you owe on it anyway.
Buy a car for less than the California auto exemption amount. In California, up to $3,500 of equity in a car is exempt from bankruptcy. This means you could buy a cheaper car that meets the exemption amounts and surrender the high-payment car to the bankruptcy court. That way, you keep your “new” car in bankruptcy and rid yourself of the one you can’t afford.
The bottom line is that bankruptcy alone won’t strip you of everything, including a car. If you’re worried about losing your car in bankruptcy, it’s wise to speak to a California bankruptcy attorney sooner rather than later so that you can understand your options in time to make the right choice for your situation.
For more information about keeping your car in bankruptcy, contact attorney Kerry Denton at Denton Law Group at (619) 458-3739.