Immediately after being asked if a client can keep a house, they usually ask me if they can leave their car when they file for bankruptcy in Chapter 7 in Michigan. Cars are really important especially in this area, where we do not have a very good public transport system. We need cars to work, get kids to school and take care of all our daily tasks.
First we need to find out if your car is even an asset. Remember that the Trustee of Chapter 7 is interested in assets. Your car should cost more than you should be an asset. You can use NADA to evaluate your vehicle. Using federal exceptions, you can protect up to $ 3,225 in equity in your car. If you have more equity than this, you can use some of your limitations for copy protection. Almost all of my clients get their cars.
However, if you have, say, a new Audi 2010, and are paying for it, then get ready to hand over the keys to your Trustee. Most of my clients do not have luxury sports cars, but you understand my point. If your car costs less than you owe, you need to make sure that you want to keep it. Maybe it broke, it has a really high interest rate, or it costs a lot, much less than what you owe. In such cases, you can not keep the car. You can get away from it, and any flaw will be cleared in your chapter 7.
If you have a loan on your car and you still want it, you will have to sign a confirmation agreement. When you file for bankruptcy, any loan contracts that you have signed are destroyed. This includes car loans. The confirmation agreement restores the car loan. If after bankruptcy you are by default, the creditor can return the car, sell it and sue any deficiency, so make sure the car is worth the risk.
To learn more about bankruptcy, please take the time to visit my website at: Downriver Bankruptcy.
