How to Handle Car Loans
You must inform the bankruptcy court what do you want to do with your debt that are attached to collateral property for a Chapter 7 bankruptcy. In this case, it can come up with car loans. Normally, the debtor has three choices:
The first choice is the debtor can keep the car by reaffirming the debt on the collateral in a Chapter 7 Bankruptcy. If the debtor continues to make the agreed upon loan payments and reaffirm the debt, then the debtor can keep the vehicle. On the other hand, the debtor does not get rid or discharge the car loan by reaffirming the debt. If you fall behind on payments, the lender has the right to repossess the car where they can sell and sue the debtor for any deficiency if there is any. A deficiency means is the difference from what they sold the car for and the lien that you had against the car. Normally, the courts call this a deficiency judgment and it is no fun in paying this difference. The firm sees a lot of debtors deal with this because the debtors are paying for no use of property when in this scenario.
The second choice is the debtor may redeem the vehicle and does not have any liens attached to the vehicle in a Chapter 7 Bankruptcy. In order to do this, when the debtor files for bankruptcy, the debtor has to pay the lien holder either the fair market value of the vehicle or how much they owe whichever is lower. This is rarely done, but it can happen if you are in a right situation for this.
The third and final choice which is the most unpopular one among debtors unless your vehicle has serious issues or broken down is the debtor may discharge the car loan and surrender the car to the lien holder. This option permits the lien holder to repossess the vehicle. When the vehicle is surrendered to the lien holder, the debtor is no longer liable for the car and the loan is discharged. Suppose that the lien holder repossesses the vehicle and sell the car is less than what is owed on the car, the debtor would not be liable for the deficiency. If the debtor is in arrears on the car payment and is not able to make future payments, the debtor can leave the debt and discharge the lien by surrendering the car.
When you are making payments on the car loan at the filing of the Chapter 7 Bankruptcy, you can discharge your liability on the car loan and be able is still own the car on condition that you make payments on time.
Should you have any concerns or questions about filing bankruptcy, call your Maryland Bankruptcy Attorney at the Soubra Law Firm as well as your Frederick Bankruptcy Attorney. Bankruptcy Attorney proudly serving the Maryland Area such as Frederick County, Carroll County, Washington County, Montgomery County, and the remaining Maryland County. We can be your Frederick Bankruptcy Attorney and beyond. The Frederick Bankruptcy Firm phone number is 301-219-5038. We look forward to serve you through your bankruptcy ordeal.