Expert Henderson Bankruptcy Attorneys Discuss How To Get Out Of a Car Loan
Sometimes a vehicle causes financial stresses that lead to bankruptcy. Since most people in Henderson and throughout the greater Las Vegas Metro area count on their cars as a main source of transportation, it is an issue that is relatable to most. If you are struggling with debt from a car or are needing to file bankruptcy and worry about getting a car loan, call our Henderson Bankruptcy Lawyers today and get the answers you seek.
Even with careful financial planning, life circumstances out of our control can sometimes call us to fall into debt. Medical emergencies, divorce, natural disasters, and other unforeseen circumstances can create debt that may eventually become unmanageable. When debt gets out of hand, bankruptcy may be available to you as a means to address your financial situation. However, it’s important to keep in mind how filing bankruptcy can affect your current car loan, and your ability to obtain new auto financing in the future. There are several ways that your car loan can interact with both Chapter 7 and Chapter 13 bankruptcy. Depending on the chapter you file, the terms of your loan, and your wishes, you may be able to redeem, reaffirm, or surrender your vehicle in bankruptcy. If you have additional questions about how bankruptcy and car loans interact, contact our Las Vegas bankruptcy firm for your free consultation.
Surrender Or Keep Your Vehicle In a Nevada Bankruptcy Filing?
Many people who file bankruptcy do so because they want to avoid a repossession and keep a vehicle. The Automatic Stay, which goes into effect once a bankruptcy petition is filed, also stops home foreclosures, wage garnishments, and other creditor collection methods. But for some, keeping a vehicle isn’t the best option. When a vehicle is too expensive, or has mechanical issues, some filers choose to surrender it in bankruptcy. Setting up a date with your lender to give back a vehicle can be far less stressful and embarrassing than a potential repossession in the future. That doesn’t mean you’ll be left without a vehicle- you may be able to qualify for auto financing before your case is discharged.
Nevada Chapter 7 Bankruptcy Exemptions
Chapter 7 bankruptcy offers enormous benefits, namely discharging unsecured debts without repayment. To keep people from abusing the bankruptcy process, there are limits on income and assets for those who file. In a Chapter 7 bankruptcy, all of your assets must be “exempt,” or the trustee can seize them to sell and pay your creditors. Any assets were more (or with more equity) than the applicable exemption could be at risk.
In Nevada, the bankruptcy exemption for a motor vehicle is $15,000. The exemption is unlimited if the filer has disabilities that require special motor vehicle equipment. If your vehicle is paid in full, it must be worth $15,000 or less if you wish to retain it in a Chapter 7 bankruptcy. You can calculate your equity by subtracting your loan balance from your vehicle’s value. You should contact a bankruptcy attorney if you are concerned about protecting your vehicle in a Chapter 7 bankruptcy.
Debt Reaffirmation & Redemption Of a Vehicle During Bankruptcy
In a Chapter 7 bankruptcy, some vehicle lenders will allow you to simply continue paying on the terms of your loan without any official process. Others require a more formal process to show that you will while paying off your vehicle. There are two options you have to do so in a Chapter 7 bankruptcy. The first is a reaffirmation. This is your official confirmation with the court that you will continue paying off your vehicle per the terms of your original loan. You may be able to negotiate a lower interest rate in your reaffirmation. You will need to sign a new agreement with your lender, and attend a separate hearing. Your trustee will only approve the reaffirmation if it is a financially viable situation for you. You must remain current on your payments after a reaffirmation, or your lender can negative credit report and repossess the vehicle.
While it can be difficult, you may be able to redeem your vehicle through Chapter 7 bankruptcy. This allows you to pay the market value of an asset for which you owe more than it’s worth. There are a few requirements you must meet to qualify for redemption. First, the asset in question must be tangible, personal (not real estate) property that serves as collateral for a secured debt. Second, the trustee must abandon it. Next, this must be a consumer debt, as opposed to a business debt. You also generally must be able to pay the redemption value in a lump sum. Your time limit to do so will usually be within 30 days of your 341 Meeting of Creditors. The property must also be otherwise exempt in bankruptcy.
Car Payments & Rebuilding Your Credit
One of your top concerns regarding bankruptcy may be rebuilding your credit after your debts have been discharged. This can be crucial to qualifying for new lines of credit, including mortgages, in the future. What you do with a financed vehicle can have a large impact on your credit recovery process after bankruptcy.
If your vehicle falls within your state’s exemptions, you aren’t required to surrender it in Chapter 7 bankruptcy. The balance of any auto loans will be paid in full in a Chapter 13 bankruptcy. So you may be wondering how keeping your current vehicle will affect your credit if you file Chapter 7. When you retain the same vehicle after a Chapter 7, your lender is no longer required to report your full and timely payments, or the ones that can boost your credit score. Your lender may, however, continue to report when you make late payments. Basically, keeping the same vehicle through a bankruptcy only provides you with the possibility of damaging your credit. Lenders who finance your purchases after bankruptcy, on the other hand, are required to positively report. While you will still have the potential to miss payments and hurt your credit with a new vehicle, you will at least have the opportunity to boost your score with your timely payments. You may not even have to wait until your debts are discharged to finance a new vehicle after filing a Chapter 7 bankruptcy petition. Many of our clients have obtained auto financing just a few days after filing.
Contact Our Henderson Bankruptcy Lawyers Today. Stress No More. Help is Here.
Do you have more questions about how filing bankruptcy in Nevada will impact your car loan? Our Henderson bankruptcy lawyers are here to answer your questions and help you through the bankruptcy process. This will give you the knowledge and confidence to file your bankruptcy in a way that allows you to keep your vehicle. Our dedicated staff and attorneys offer quality representation at an affordable price, as well as flexible hours and phone appointments for your convenience. Not only that, but our Henderson bankruptcy attorneys offer post-filing payment plans as well- many of our clients qualify to file bankruptcy for zero dollars down. To learn more, call or use our online form to schedule your free consultation today.
Henderson Bankruptcy Attorneys
1489 W. Warm Springs Rd., Ste. 110
Henderson, NV 89014
Phone: (702) 899-3328