How will bankruptcy impact my car loan?

If you have a loan on your vehicle, generally you will get to keep it, provided you continue to pay the lender just like you did before you filed bankruptcy. If you miss payments on your car, the lender can repossess your vehicle, but they usually need to obtain permission from the Bankruptcy Judge before doing this. Loans on cars are called “secured” loans because the loan obligation is attached, or secured, to the vehicle. If you do not pay your lender as agreed, the lender can take back the car and then sell it to satisfy your obligation. Bankruptcy only gets rid of the debt associated with what you owe on a car. Bankruptcy almost never gets rid of the secured status of a lender who has loaned you money to buy a car. This is why someone can still lose their car after their bankruptcy case has long since been closed, but only when they fall behind on the monthly payments.

If you intend to keep your car after bankruptcy, just remember to keep paying as agreed. As long as you are current the lender cannot take your car. However, if you decide that your car is too expensive or not worth keeping, you can “surrender” it, or give it back to the lender and you will never have to make another car payment. If you are considering filing bankruptcy, it is best to consult an experienced attorney who can advise you about your specific circumstances so that your case proceeds smoothly from filing to discharge and that you get the optimal “fresh start”. Contact us today to get your questions answered by an experienced bankruptcy attorney, and to see if you qualify for free representation.

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