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TJ, Esq.
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 11780
Experience:  JD, MBA
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Will I have to surrender my vehicle

Customer Question

Will I have to surrender my vehicle?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  TJ, Esq. replied 8 years ago.

Hello and thank you for allowing me to address your legal question.

The answer depends on a few factors. Is the vehicle being financed or do you own it outright? If the vehicle is being financed, how much equity do you have? If you own the vehicle outright, what is it worth?

In California, you can protect a vehicle, or its equity, up to $2300. Therefore, if your vehicle is worth $2300 or less and you own it outright, then you will not have to surrender it. If the vehicle is worth more than $2300 and you own it outright, then the vehicle will be sold and the bankruptcy trustee will take the proceeds, less $2300 which you will get back. If you are financing the vehicle and you have more than $2300 in equity, then the vehicle will be sold and the bankruptcy trustee will take the proceeds, less $2300 which you will get back. If you are financing the vehicle and it has less than $2300 in equity, then you will not need to surrender it.

There is a caveat to the last two circumstances above, however. If you are financing the vehicle you must keep paying on your loan or the lender will repo it just like it would prior to filing for bankruptcy (the bankruptcy simply makes the lender jump through more hoops).

If the information that I provided was helpful, please remember to ACCEPT my post as that is the only way I will receive credit and compensation for my answer. Thank you and good luck!

DISCLAIMER: Please understand that the complexities of most legal problems cannot be sufficiently addressed in this setting. Accordingly, my post is intended as general information only, and should neither be construed as specific legal advice, nor as an adequate substitute for the retention of legal counsel.

Customer: replied 8 years ago.
Okay...here is what is going on. The vehicle is financed, KBB states the retail value is $5000, I still owe approx. $13,000. I am late on the payments right now which the lender is trying to repo it now. I have had the vehicle 2 years. I have yet to decide whether to file chapter 13 or 7. I have alot of debt in excess of $15,000, so I am leaning towards 7. So based on your answer I will more than likely have to give it up?
Expert:  TJ, Esq. replied 8 years ago.
Under a Chapter 7: Unless you "reaffirm" the loan and continue to make payments, then you will have to give up the vehicle so the creditor can sell it and apply the proceeds to the loan. If you do reaffirm the loan, then the loan will not be discharged (i.e. you will still owe the $13,000 after the bankruptcy is closed). Considering the huge discrepancy between the value of the vehicle and what you owe on the loan, reaffirming the debt is probably not a good idea.

Under a Chapter 13: The loan will be included in the 3 to 5 year plan, and the lender will have to be paid at least $5000 (i.e. the value of the vehicle if it were repo'ed and sold). That will allow you to keep the vehicle.

Basically, the 13 allows you to keep assets, but you have to pay into a plan for a number of years. The 7 allows you to wipe out the debt quickly, but you'll lose your assets. Unless you have other non-exempt assets that you want to protect, a 7 may be best.

Does that answer your question? Please remember to accept my post. Thank you and good luck.