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Figuring out what to do with your car loan is one of the big decisions you’ll face when filing for Chapter 7 bankruptcy in Raleigh, NC. As your bankruptcy attorney, I’m here to walk you through the process and help determine the best path forward, given your unique financial situation.
Under Chapter 7 bankruptcy, you typically have three main options for dealing with vehicle loans:
- Reaffirmation
- With a reaffirmation agreement, you agree to continue making payments on your car loan as originally contracted, despite the bankruptcy.
- This allows you to keep the vehicle as long as you stay current. The lender will have you sign a reaffirmation agreement to reaffirm the debt. I’ll review the terms to ensure they are in your best interest before filing the agreement with the court.
- Redemption
- Redemption lets you pay off the car at its current fair market value rather than the full loan balance.
- This can significantly lower the amount needed to own the vehicle outright. If you have access to funds (like from a friend or relative), redemption may be a smart choice – especially if you have negative equity.
- As your Weik bankruptcy attorney in Raleigh, I can help you determine the car’s value and file a motion with the court to approve the redemption.
- Surrender
- If you can’t afford the payments or no longer want the vehicle, surrendering it in bankruptcy is also an option.
- This erases your liability for any loan balance remaining after the car is sold at auction. While giving up your automobile is never easy, in some cases, it’s the most financially prudent move.
- We can discuss transportation alternatives and ensure you’re well-positioned to get another vehicle in the future.
It’s important to note that North Carolina bankruptcy exemptions only protect up to $3,500 in motor vehicle value ($7,000 for joint filers), if the automobile is in joint names.
If your car has more equity than this, the trustee could potentially sell it to repay creditors. We’ll carefully assess your vehicle’s equity and explore ways to protect it. For instance, there’s a that may be applied depending on your case.
Also, keep in mind that if you’re behind on payments, the automatic stay in Raleigh bankruptcy only temporarily stops repossession. The lender can still seek court permission to reclaim the car. That’s why it’s crucial to decide on your statement of intention and take action quickly.
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No matter which route you choose, know that I’m in your corner throughout the process. Together, we’ll create a customized plan to handle your vehicle loan in a way that provides much-needed financial relief while also meeting your transportation needs.
If you’re considering Chapter 7 bankruptcy and need guidance on managing your car loan, call Weik Law Office today at 919-845-7721 for a free consultation and set up a time to speak with one of our friendly professionals.