When you make the difficult decision to file for bankruptcy, you may be excited to receive financial relief for the debts in your name. However, it’s important to understand what will happen, like the restructuring of your debts. In some instances, depending on what type of bankruptcy you file, you may have to relinquish your vehicle. As such, understanding how bankruptcy impacts car loans is critical. The following blog explores some of the most common questions you may have regarding these matters and explains why it’s in your best interest to connect with a Memphis, TN vehicle repossession defense lawyer to discuss your circumstances.
What Happens to Car Loans When I File For Bankruptcy?
When you file for bankruptcy, understanding what will happen to your car loan is critical. Generally, how this debt is handled will depend on which kind of bankruptcy you file for. It’s important to understand, first and foremost, that filing for bankruptcy grants an automatic stay. Essentially, this means that all creditors must cease collection efforts when you file.
If you file for Chapter 7, this means you’re opting to liquidate your assets to pay off outstanding debts in a shorter period. As such, your vehicle could be at risk for repossession to satisfy the car lender. In Tennessee, you may be able to protect your vehicle from your bankruptcy trustee by applying a bankruptcy exemption to your vehicle. Because the state does not have a motor vehicle exemption, you can consider using the $10,000 wildcard exemption toward your vehicle. However, you’ll need to protect all vehicle equity. You’ll also need to be on top of loan payments to satisfy your lender.
If you file for Chapter 13, your car debts will be factored into the repayment plan that’s right for you. This is because your debts are restructured, meaning you will have a three to five-year repayment plan you must adhere to. If you choose this option, it allows you to catch up on payments.
How Can a Memphis Bankruptcy Attorney Help Me?
As you can see, there are many considerations you must make regarding your car loan when filing for bankruptcy. That’s why it’s in your best interest to connect with an experienced attorney. They can help examine your circumstances to determine what is best for your circumstances and walk you through the process to ensure you understand what you must do to receive a financial fresh start while protecting as much of your assets as possible.
If you are worried about what will happen to your vehicle when you file for bankruptcy, connecting with an experienced attorney as soon as possible is critical. At the Arnold Law Firm, we understand how overwhelming this process can be, which is why we are committed to doing everything possible to guide you through these complex times. Connect with us today learn how we can fight for you.
