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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2815
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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My daughter is filing a chapter 7. Bankruptcy .I have a signed

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My daughter is filing a chapter 7. Bankruptcy .I have a signed contract with my daughter reflecting that I made her a loan to purchase a 2013 Honda. The contract reflects that my daughter would pay me $378.00 per month until the vehicle was paid in full. I am not listed on the title as a lienholder, but the contract reflects that the vehicle is still being paid on. The courts are saying that since I am not listed on the title as a lienholder the car is clear and that she has to turn it over to the bankruptcy courts since the vehicle value exceeds the allowed value for exemption. Can they do that? If they can do that, can she change her chapter 7 bankruptcy filing to a 13 in order to keep the vehicle? The chapter 7 has not been completed.

Terry L. : Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.
Terry L. : Unfortunately, you have what is called an unperfected security interest. A bankruptcy discharges unsecured debts, which your loan is unsecured, until you took the steps to record your 'lien' on the title. Therefore, the car is paid for, and the trustee can liquidate any assets to pay the unsecured creditors.
Terry L. : You would get a proof of claim form to share in those proceeds pro-rata with the other unsecured debts.
Terry L. : Now, she can buy out the trustee to keep the car, but she'd have to come up with the funds to do so. Check with 722 redemption funding, as they can finance the buyout for her, and then she'll have a new loan with them for that buyout price she can negotiate with the trustee.
Terry L. : Your daughter can convert the case too to chapter 13, and then she'll have to repay back debt, enough to protect the unencumbered car, basically, at minimum she'd be paying back the same amount the trustee would have gotten if they sold the car, and pay that back over 3-5 years. It's not automatic, so she'd have to bring a motion to do so, showing the court that she can afford the necessary chapter 13 plan payment that is minimally required under the code.
Terry L. : What questions do you have?
Terry L. : It seems you have stepped away, when you reply, I'll be notified, and I'll respond.Thanks
Terry L. : Terry
Customer: Terry. Thanks for the information.
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