Can I Keep My Car if I File Bankruptcy in Arizona?
When people are considering filing for bankruptcy, there are two things that keep them from taking the plunge. Some people are afraid that filing a chapter 7 will destroy their credit. Other people are worried about the practical side of things. For example, if your house is mortgaged, will they foreclose on your home? And, if you have a car, will they take it from you? These are the fears that make people drown in debt rather than take advantage of the bankruptcy solution. If you’re going through this dilemma right now, call and talk to one of our Arizona bankruptcy lawyers. They can answer any questions you have and help you figure out the best option for you and your family.
It Depends on Whether You File a Chapter 7 or 13
If you file a chapter 7, you’ll probably be able to keep your car. It all depends on how much equity is in your car. If you file a Chapter 13, it comes down to whether you own it outright or still have payments left on your car. If you own your car in a Chapter 13, nothing will happen to it. It won’t be affected at all. But if you’re financing your vehicle, it will be up to the bank and how much equity you have in the car. In Arizona, you get a $5,000 exemption for your vehicle. If your car is worth $10,000, the trustee will deduct your exemption of $5,000. That leaves a loan of $5,000. The trustee will typically just include this debt in your Chapter 13 reorganization.
Your Arizona Bankruptcy Lawyer Will Determine Your Equity
If your car is being financed and you file a Chapter 7, it all comes down to your equity. In a Chapter 7, you get the same $5,000 exemption. (This amount is doubled if you’re disabled.) This amount will be subtracted from the value of the car. So, let’s say your car is worth $7,000 and you still owe $4,000. That leaves $3,000. The bank does have the right to take the car and sell it to go toward the dent. Your Arizona bankruptcy lawyer will talk to the trustee and see if they can get the bank to let you continue making payments on the car, despite the bankruptcy.
What Happens if Your Car is Paid Off?
If your vehicle is already paid off, your Arizona bankruptcy lawyer will fight so you can keep it. If you file a Chapter 13, your car won’t be affected. If you file a Chapter 7, as mentioned above, it’ll depend on how much it’s worth. If it’s worth less than $5,000, you’ll be fine. Or if it’s a car that you and your spouse share, your total exemption is $10,000. If the difference is small, the trustee may be willing to work something out with the other creditors so you can keep it. If it’s worth more than a few thousand dollars, the creditors may want it sold so the proceeds can go toward the money you owe them.
Call an Experienced Arizona Bankruptcy Lawyer
It can be confusing trying to figure out how the bankruptcy rules work in Arizona. That’s why it’s a good idea to call and talk to a seasoned Arizona bankruptcy lawyer before you do anything. As much as you want to get out of debt, you also want to protect the few assets you do have. Call and set up a date and time to come in and meet with one of the attorneys. Let them give you the peace of mind you need at a time like this.