Keeping Your Vehicle in a New Jersey Bankruptcy

No matter what type of vehicle you own or what condition it may be in, your car provides a vital means of transportation for you on a daily basis. Without the dependable income that comes from holding a job, getting back on one’s feet following a bankruptcy is nearly impossible, and without a car, getting to work is a challenge. It is no wonder that those who consider filing for bankruptcy are often preoccupied with whether the bankruptcy court will allow them to keep their vehicles.

The good news is that you do not automatically lose your vehicle when you decide to file for bankruptcy in New Jersey. How you keep your vehicle will depend on whether you file under Chapter 7 or Chapter 13 of the Bankruptcy Code.

Chapter 13 bankruptcy is a method of debt reorganization. This type of bankruptcy involves restructuring your debt and working with creditors like your car lender to determine a workable solution. Chapter 13 allows individuals to reorganize their debts into an extended repayment plan. The bankruptcy process can stop vehicle repossession and allow you to catch up on your car and pay it in full. If your car is already paid for and has a high value, a Chapter 13 plan can help you pay the value into the bankruptcy and keep the car.

Chapter 7 bankruptcy has a different set of options. If you owe money on your car when you file Chapter 7, you can either agree to reaffirm the loan and keep making payments, surrender the car and discharge the loan or redeem the value. Reaffirmation is the most common of the two methods you can use to keep your car; to reaffirm the debt, you simply sign an agreement to remain responsible on the payments despite the bankruptcy. Redemption is less common; you must prove the vehicle’s value and come up with a lump sum in that amount to pay the lender for the car. If you have a leased vehicle in a Chapter 7, you must sign a lease assumption agreement to keep the car. Whether you are reaffirming a car loan or assuming a car lease, you must show the bankruptcy court that you can afford the payment, that the payment is reasonable and that you are not behind on the payments.

If you own your vehicle outright in a Chapter 7, you can protect it from the Chapter 7 trustee up to a certain value. Most people are able to keep all their property in Chapter 7 cases, including their cars; however, Morris County bankruptcy lawyer can help you determine whether a Chapter 7 would be right for you and whether you would lose your car in a Chapter 7 bankruptcy.

Filing for bankruptcy does not mean that you have to give up all your possessions, and it is perfectly possible to keep your car and other valuables as you take the steps toward righting your financial situation. Contacting a Morris County bankruptcy attorney can help you determine what type of bankruptcy is best for keeping your vehicle.



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