Acquiring debt is a part of life from car loans, mortgages, credit cards, and other things. However, some individuals fall under harsh circumstances where they do not have the financial capability to pay off the debt they accumulate. If you cannot pay your debts, you have the option of filing for chapter 7 or chapter 13 bankruptcy, but choosing to file for bankruptcy should not be taken lightly.
It should only be considered as a last resort.
So, what happens to your assets, such as your car, when you file for bankruptcy?
With chapter 7 bankruptcy, the court can seize your car and sell it to pay off the debt. With chapter 13 bankruptcy, the court can help you to establish a different type of payment plan.
Keep reading to learn more about exactly what chapter 7 and chapter 13 mean and what happens to your assets under them in Massachusetts.
Chapter 7 Bankruptcy and Your Car
Under chapter 7 bankruptcy, the court discharges some or all of your debt so creditors cannot come after you for unpaid accounts. The court appoints a trustee who seizes and sells your assets to pay off the debt to creditors, and this can include your vehicles, your home, business property, and any other assets you may have.
There are exemptions laws that allow you to claim certain assets as “exempt,” meaning that the asset cannot be sold, but all “nonexempt” assets can be. These exemption laws are to help you stay afloat during times of financial need. You can keep your vehicle if you need it to travel to and from work. You can keep your home if you need someplace to live. Some creditors will be forced to accept less than the total debt owed.
Assets that are deemed exempt or nonexempt change on a case-by-case basis depending on financial duress and value of assets. In the state of Massachusetts, if you are behind on car payments, you will not be allowed to claim exempt so it may be seized.
Some car loans are issued by what are called “secured creditors,” making the car “secured property.” This means the car payment must be paid or the car will be seized and sold off to finance your creditors.
However, you can appeal to the court for a new payment plan where each payment can be decreased and there will be more time between each payment to acquire the funds. Paying off the full amount of the debt will take longer, but this is to allow you can catch up on missed payments. Secured property can also include homes.
Chapter 13 Bankruptcy and Your Car
Chapter 13 bankruptcy is essentially a restructuring of debt. Under chapter 13, you and the court agree to a payment plan to repay creditors and catch up on any missed payments. This allows you to keep your vehicles and other assets as you can pay more according to your financial ability. In addition to restructuring your current debt, the court also requires an additional payment to them to be used to catch up on missed payments.
The qualifications for chapter 13 bankruptcy and to be able to maintain your assets include having to prove you have the income to make the payments as well as the ability to continuously pay your daily bills such as mortgage and car loans without accruing any more missed payments.
Summing Up
Filing for bankruptcy due to financial troubles doesn’t have to be the end of the world. The purpose of bankruptcy is to allow you to keep your head above water while ensuring creditors receive their money owed. Your car and other assets will not necessarily be seized as there are ways to keep your valuable assets in your possession. Be sure to speak with a bankruptcy lawyer as they can walk you through the process and answer any questions you have.
Speak to a Bankruptcy Attorney Today
Don’t let excessive debt take over your life. A personal bankruptcy attorney can help you keep your car and home as well as eliminate debt so that you can regain financial stability and progress. Hines Law is a leading Massachusetts personal bankruptcy law firm that specializes in Chapter 7 and Chapter 13 filings and has been helping clients with debt solutions throughout the greater Boston area for more than 2 decades.
Find out if personal bankruptcy is right for you by speaking with one of our attorneys. Call for a Free case evaluation today.