Can I File Bankruptcy and Keep My Car: Steps & Tips
Are you facing unbearable debt and considering bankruptcy? If so, the good news is there are ways to file bankruptcy and keep car. In this guide, we’ll walk you through the ins and outs of filing Chapter 7 or Chapter 13 bankruptcy in Florida and keeping your vehicle at the same time.
If you’re worried about claiming bankruptcy and keeping your car or other property during the liquidation or debt repayment process, our attorneys are here to help. Contact us today to schedule an appointment with a proven bankruptcy lawyer in Florida.
Step 1: Determine Eligibility for Car Exemption: Understanding Federal and Florida Rules
Worrying about whether “Can I keep my car if I file bankruptcy?” Protecting your car during the bankruptcy process usually requires you to qualify for a state or federal car exemption. Essentially, these exemptions are legal provisions that may allow you to shield certain assets from liquidation.
However, you’ll need to understand both federal bankruptcy exemptions and Florida-specific exemptions to determine exactly how to keep your car when filing bankruptcy.
Identifying Applicable Exemptions
- Federal Exemptions: In most states, the choice between using federal bankruptcy exemptions or your state’s exemptions is up to you. Federal exemptions include a limited motor vehicle exemption. Depending on the circumstances of your case, the federal exception may help you keep your car. However, it’s best to consult with an attorney first to be sure.
- Florida Exemptions: Florida has its own set of bankruptcy exemptions which includes a motor vehicle exemption of up to $1,000 in equity (more if you’re married and file jointly). Here’s what that means: Suppose the value of your car exceeds your outstanding loan balance by $1,000 or less. In that case, the exemption will likely cover it. Though, if your car’s equity is higher, your attorney might still be able to help you keep the vehicle via other negotiation strategies during the bankruptcy process.
It’s important to note that bankruptcy laws are incredibly complex and state-specific. For these reasons, among others, consulting with an experienced bankruptcy attorney is typically the best way to learn whether or not your car actually qualifies for an exemption in your particular situation.
Equity and Loan Assessment
For the most part, assessing your exemption eligibility requires you to determine the following, but not limited to:
- Equity: The difference between your car’s fair market value and the outstanding loan.
- Loan Status: If your car has a loan, this secured loan can change how things work during bankruptcy proceedings.
Remember, you don’t have to figure this out alone – We’re here to help. Contact us today for your free trial with a lawyer you can trust.
Step 2: Choosing the Right Type of Bankruptcy
All bankruptcies aren’t created the same. As such, the type of bankruptcy filed can significantly impact your ability to keep your car. Generally, the two most common types of bankruptcies for individuals are Chapter 7 and Chapter 13, each with its own approach, steps, and outcomes.
Chapter 7 Bankruptcy: Liquidation and Exemptions
During Chapter 7, your trustee might liquidate non-exempt assets to pay debts. In that case, if your car’s equity falls within allowable exemptions, you could keep your car if you file bankruptcy. On the other hand, if your equity is too high, there may be ways for you to buy back the equity portion.
- How it Works: In Chapter 7, a bankruptcy trustee may liquidate (sell) your non-exempt assets to repay creditors.
- Car Exemptions: In the case your car’s equity falls within allowable exemptions, you have a chance of filing bankruptcy and keeping your car.
- Excess Equity: If your car’s equity exceeds exemption limits, there may be options to “buy back” the non-exempt portion of equity by paying its value to the trustee.
- Best Suited For: Chapter 7 may be best if you’re on a limited income, you have mostly unsecured debts (credit cards, medical bills, etc.), and your car qualifies for a state or federal exemption.
Chapter 13 Bankruptcy: Repayment Plans
Unlike Chapter 7, Chapter 13 involves repaying most or all of your debt via a 3-5 year repayment plan. This type of repayment option can include your car payments, providing a way to file bankruptcy and keep my car.
- How it Works: In Chapter 13, you and your attorney will propose a repayment plan to your creditors and the court to pay back some or all of your debts over a 3-5 year span.
- Protecting Your Car: Your car payments can be included in the repayment plan – Which gives you a structured way to file bankruptcy and keep car. However, you’ll need to make consistent (and on time) payments.
- Best Suited For: Generally, Chapter 13 might be the best option if you have a steady income, a significant amount of secured debt (i.e., mortgage, car loan, etc.), or your car doesn’t qualify for an exemption in Chapter 7.
Step 3: Preparing Your Bankruptcy Filing
Claiming bankruptcy and keeping your car requires your attorney to prepare and submit many documents like the bankruptcy petition, statement of financial affairs, evidence of income, documentation of expenses ,bank statements, and more.
When it comes to the documentation you’ll need for keeping your car during the bankruptcy process, that can include the following, but not limited to:
Essential Documents and Information
- Car’s title
- Loan documents
- Recent valuation of your car (e.g., Kelley Blue Book, NADA)
- Proof of income and expenses
- List of other assets and debts
Filing Your Petition
The bankruptcy petition can make or break your case. Further, any mistakes can lead to delays in the process or even an outright denial. For these reasons, it’s generally in your best interest to hire a bankruptcy attorney to help guide you through this intricate process.
Step 4: Protecting Your Car During Bankruptcy
If you’re wondering, “Can I declare bankruptcy and keep my car?” The answer is yes. However, there are a few steps you’ll need to take to increase the likelihood of maintaining ownership of your motor vehicle.
- Maintain Insurance: Keep your car insurance active throughout the entirety of the bankruptcy process.
- Make Timely Payments: Keep making car payments, especially if you’re filing for Chapter 13.
- Reaffirmation Agreements (use with caution): Be careful before signing a reaffirmation agreement, as you’ll still be liable for the debt even after it’s discharged.
Step 5: Maintaining Ownership After Bankruptcy
Even after your bankruptcy discharge, monitor your car’s value and the remaining loan balance. If unforeseen circumstances (like a car accident) cause the value to significantly decrease, it may impact whether you can retain the car through future financial difficulties.
Additionally, understanding the remaining balance on your loan will help you strategize paying it off faster, leading to full ownership and possible interest savings.
Bankruptcy is a fresh financial start. Here’s how to stay on track:
Long-Term Strategies for Success: Achieving Stability Beyond Bankruptcy
Successfully navigating bankruptcy is just the first step towards regaining financial health. Employing proactive strategies after bankruptcy is crucial to maintain long-term stability.
Post-Bankruptcy Financial Planning: Building a Strong Foundation
Bankruptcy is just the beginning of rebuilding your finances. What you do after your case concludes is just as important. Generally, if you want to increase your chances for a successful financial comeback, you should consider the following in post-bankruptcy:
- Create and follow a strict budget
- Make debt reduction a top-priority
- Build an emergency savings
- Seek financial counseling (if applicable)
At Ziegler Diamond Law, our Bankruptcy lawyers in Tampa and Clearwater are here to help you build a better financial future (during and after bankruptcy). Contact us today to discuss the details of your case and start your road to financial recovery.
Rebuilding Credit with Your Car Loan: Reaping the Benefits
Your car loan provides a unique opportunity to repair your credit after bankruptcy. Here’s how to make the most of it:
- Consistent On-Time Payments: Your car payment history holds significant weight in determining your credit score. Never miss a payment and make them on time if you declare bankruptcy and keep your car.
- Paying Extra When Possible: If your budget allows, adding a bit extra to your car payment each month accelerates paying down your loan and demonstrates good financial habits.
- Monitoring Your Credit: Regularly checking your credit reports helps you track your progress and identify any errors. Many services offer free credit monitoring.
- Responsible Use of Credit Cards: If you decide to open new credit cards after bankruptcy, use them responsibly. Keep balances low, and always make on-time payments to declare bankruptcy and keep your car. This will help further boost your credit.
It takes time and dedication to fully rebuild your credit. Focus on steady, consistent progress as you demonstrate your financial responsibility. This will open doors to better credit offers and lower interest rates over time, allowing you to save money and achieve your financial goals.
Contact The Attorney Debt Fighters
Understanding how to file bankruptcy and keep your car at the same time can be incredibly complex. The Attorney Debt Fighters are here to provide tailored advice based on your unique situation. Don’t wait until it’s too late to seek the financial protection you’re afforded under Florida and federal bankruptcy laws. Contact us today for your free consultation.
