If you don’t want to keep your car (and the debt) in a Chapter 7 Bankruptcy you can give up the car.
One of your largest monthly expenses maybe for a car loan you can no longer afford or on a car that is worth much less than you owe on it. If so, you can surrender your car in a Chapter 7 bankruptcy and be discharged of your obligation to pay any remaining balance owed on the car.
This blog will discuss what happens if you give up your car in the bankruptcy.
Surrendering your car means that you give it back to the lender you financed it with. If you surrender your car, any debt that you owe on it will be discharged (eliminated) when you get your bankruptcy discharge.
What are the Pros & Cons of Surrendering Your Car?
Here are some of the advantages and disadvantages to giving up your car in the Chapter 7 bankruptcy. Remember that whether surrendering your car is a good idea depends on your unique situation.
Benefits of Surrendering a Car include:
- You can return the car and not owe anything which is good if you owe much more than your car is worth, or if the car needs expensive repairs.
- You can stop making loan payments that you cannot afford which will give you more money to pay other expenses.
- You can return a leased car and not have to pay for excess mileage or wear and tear. If you are facing excessive costs this might make financial sense.
Downsides to Surrendering Your Car:
- You will need to find another method of transportation.
- It might be more difficult to get financing after the bankruptcy. When you get financing the loan will likely have a higher interest rate because of the bankruptcy.
What is the Process for Surrendering the Car?
You should talk with your bankruptcy attorney about the pros and cons of surrendering your car. If you decide that you want to surrender your car, you state it in the bankruptcy form called the Statement of Intention for Individuals Filing Under Chapter 7 Bankruptcy. The Creditor needs permission for the Bankruptcy Court to repossess the car either by getting your agreement or by filing a motion asking for permission to do so. Otherwise the creditor must wait until the bankruptcy case is over, and the automatic stay is no longer in effect to repossess the car.
Any deficiency after the car is sold will be discharged in your bankruptcy and you not have no further obligation to make the car payment.
What Happens if there is A Cosigner on the Loan?
If someone cosigned the loan, the cosigner would still be legally responsible for the deficiency balance—the amount remaining after the car is sold at auction. For example, if you owe $10,000 on a vehicle and the creditor sells it at auction for $6,000.00 the cosigner might be responsible for the deficiency. of $4,000.00. The cosigner could, however, discharge the deficiency by filing a Chapter 7 bankruptcy if they meet the qualifications for doing so.
Contact Us for More Information About Surrendering Your Car in a Chapter 7 Bankruptcy
If you are considering filing a personal bankruptcy and you want information on giving up your car, contact us to schedule a free consultation. Shelley Slafkes and Bruce Levitt are bankruptcy lawyers who know how to make a difference in your financial situation. We have experience you can rely on and we care about your results. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at Levitt & Slafkes, P.C.
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.