Filing for bankruptcy is a difficult decision to make, and it can feel like there are more questions than answers. One of the biggest concerns many people have when filing for bankruptcy is losing their car. So, can individuals who file for bankruptcy in California keep their car?
According to Debt.org, California has the highest number of bankruptcy filings in the state. However, if you are considering filing for bankruptcy, you might want to consult with an attorney to determine whether or not you will be able to keep your car after filing for bankruptcy. The award-winning Chapter 7 bankruptcy attorney at The Law Offices of Melanie Tavare can assess your unique situation and explain the exemptions that may be available to you.
Bankruptcy exemptions are laws that allow debtors to retain certain property when filing for bankruptcy. In California, the exemption amount for motor vehicles is $3,625, meaning individuals can keep a vehicle worth up to that amount if they file for Chapter 7 bankruptcy (the most common form of consumer bankruptcy). The value of your vehicle is based on its fair market value. If you own two cars, you may be able to double the exemption amount and keep both vehicles.
In addition, if you owe more on your automobile loan than what your car is worth, the “cramdown” provision allows you to reduce your loan balance based on the current value of your car when filing for Chapter 13 bankruptcy. This means that if you owe $10,000 on a car valued at $8,000, you can reduce the balance owed to $8,000 and continue making payments while in Chapter 13 (a repayment plan).
How a bankruptcy filing affects your leased vehicle depends on several factors, including the chapter under which you file, the status of your lease, and whether you are current on your payments. Regardless of the circumstances, you are required to disclose that you are leasing a vehicle when filing for bankruptcy.
If you file for bankruptcy and want to keep leasing the vehicle, you can “assume” your lease. Basically, it means that you will continue making your lease payments as if you haven’t filed for bankruptcy. However, everyone’s situation is unique, which is why you may need to consult with an attorney to determine whether or not leasing the vehicle post-filing can affect your bankruptcy case.
Filing for bankruptcy can come with its own unique set of challenges, but knowing whether or not individuals who file in California will be able to keep their car does not need to be one of them. Speaking with an experienced bankruptcy attorney can help provide clarity into this complex process and ensure all questions related to keeping one’s car when filing are answered so that worry does not needlessly accompany this already difficult decision-making process. Schedule a free case evaluation with a bankruptcy attorney at The Law Offices of Melanie Tavare by calling 510-255-4646.
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