CAN YOU KEEP YOUR CAR WHEN YOU FILE CHAPTER 7?

Frequently, clients want to know if they can keep their car when they file a bankruptcy. Under chapter 13, generally, a debtor can hold on to all their assets. Retaining assets is only an issue under Chapter 7 Bankruptcy.

As stated previously, the law provides a list of “exemptions” that allows a debtor to hold on to various assets when he files. In January 2011, the law changed to increase the vehicle exemption from $2500 to $4,000. This means that if your car is worth $4,000 or less, your car is protected from creditors. If your car is worth $20,000, but you have a note for $16,000 on the car, you can keep your car because your equity is only $4,000.

Now, if you owe more than the car is worth, there is another attractive option. When you file Chapter 7 Bankruptcy, you may apply for the refinance of your car under the 722 program. If you have enough income to cover the loan payments, you can get a loan modification for the book value of the car and the bank will reduce the total amount you owe and dramatically reduce your monthly car payments.

For more information email me at j.weinstein@jlwlawoffices.com or call me at 212-693-3737 for Free Consultation