In most cases people who file for Bankruptcy do not lose their cars. If there is no debt on the car, and if the value of the car does not exceed the value of “exemptions” the law provides, you will not lose the car. Presently, in Indiana, an individual who files for Bankruptcy may protect $9,350 of equity in personal property. In a joint Bankruptcy [Husband & Wife] the total value of that exemption is $18,700. Cars qualify as “personal property”.
If the car is collateral for a debt associated with the car, then you may have to pay the creditor in order to keep the car. In a Chapter 7 Bankruptcy, if a car is used as collateral for a debt, you may be able to “reaffirm” the debt the creditor and keep the car. If you “reaffirm” the debt, it generally puts you back in the same position you were in with the car creditor before the Bankruptcy was filed. In a Chapter 13 Bankruptcy, you will be able to alter the rights of the car creditor, and if the car financing was more that 910 days [2.5 yrs] before the Bankruptcy was filed, you may be able to reduce what you pay for the car down to the value of the car. In addition, the debt on the car will be paid through your Chapter 13 Plan, so keeping the car may become much easier because you can reduce the interest rate and spread out the time frame for paying off the car debt.
There are several other complex issues surrounding cars with the the setting of a Bankruptcy. When you meet with me I will explain the entire process surrounding your vehicle with you in clear terms.