For most people, having access to a car means having access to transportation to and from work. The loss of that car during bankruptcy could very well mean you won’t be able to get to work. Read on to learn about what happens to your car during bankruptcy.
Will Bankruptcy Drive Away With Your Car?
In Arizona, if you have a car with $25,000 worth of equity and you want to file bankruptcy, you have a problem. The Arizona bankruptcy exemption for an automobile is $5,000 worth of equity per debtor; in some cases, it can be as high as $10,000 per debtor. There are solutions available, but they are not always easy. An experienced bankruptcy lawyer can help you through the process.
In theory, bankruptcy should work the same for everybody. While bankruptcy courts have tried hard to standardize the process, they have not found a consistent way to do that for car loans. The way the rules regarding car loans are written, judges are given a lot of freedom of interpretation. Since every judge handles these cases differently, you want an experienced attorney on your side who can back your claim.
In the best case scenario, people filing for bankruptcy own their car outright. If you own your car or it’s over-encumbered, you should be able to find a way to keep it. If you have outstanding loans on your car, you will have to decide how badly you want to keep your car.
At AZBK Lawyers, we help people across Arizona reduce their debt. Whether you are unable to pay off your car loans, struggling with credit card debt or facing multiple concerns, we can come up with a plan tailored to your concerns. The solutions may not be easy, but they are out there.
Deciding on Bankruptcy
When you’re facing a large amount of debt, it can feel insurmountable. Should you file for bankruptcy? How does bankruptcy work? As always, it’s advised that you work with a phoenix chapter 7 bankruptcy lawyer or phoenix chapter 11 bankruptcy lawyer to help you determine if bankruptcy is the next step for you, or if there are other options for you. Below we review what forms of bankruptcy might work for you, what a means test is, and questions you should consider if you are already considering bankruptcy.
Quick Overview of Bankruptcy
Depending on your situation, if you’re considering filing for bankruptcy, you’ll need to determine which form of bankruptcy, either Chapter 7 or Chapter 13, you should file.
Chapter 7 (also known an straight bankruptcy) is the most common form of bankruptcy and is available to consumers and businesses.
Under Chapter 7, assets are sold off so that the proceeds can go to paying debt. All proceeds from the sales of those assets are handed over to a trustee, who then pays down any and all creditors. After all creditors have been paid off they are no longer able to collect funds directly from you and your debts are cancelled, meaning you are no longer responsible for them.
You are not able to discharge the following debts under Chapter 7:
- Alimony and child support
- Drunk driving judgments, criminal fines, restitution
- Debts incurred as the result of fraud or intentional wrongdoing
- Back taxes under 3 years old
- Student loans
- Recent purchases made for substantial amounts
- Contracts involving titles or liens such as land or automobiles
Chapter 13 reorganizes debt so that you are able to pay back debts over the next three to five years. This pay-back plan is called a debt repayment schedule. Based on your income, and how much you owe, you’ll repay 10-100% of the debt you owe.
You are not able to discharge the following debts under Chapter 13:
- Alimony and child support
- Drunk driving judgments
- Criminal fines
- Student loans
Reasons to File Chapter 7
Chapter 7 bankruptcy should be chosen if the following apply:
- You have no hope and have no future hope of being able to repay any debts
- Your debts do not have co-signers on them
- You are going to be sued by creditors
- You don’t qualify for Chapter 13
Reasons to File Chapter 13
Chapter 13 bankruptcy should be chosen if the following apply:
- You have already filed Chapter 7 in the past six years
- Your debts have cosigners
- You will be able to pay your debts within three to five years
- Your income disqualifies you from filing for Chapter 7
- You need relief from collection proceedings and you want to pay your creditors back but just need some breathing room to get your finances under control
- You want to be able to file a Chapter 7 bankruptcy some time in the future
- You are behind on your mortgage
- You owe back taxes
- You have assets that could be liquidated in Chapter 7
- You’re a farmer with debt not related to your farming operations and do not qualify for Chapter 12
Working with a Bankruptcy Attorney
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix chapter 13 bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
668 N. 44th St., Ste 320, Phoenix, AZ 85008