Can You Discharge the Debt and Keep Your Car?
When you’re facing seemingly insurmountable financial challenges, a Chapter 7 bankruptcy can seem like a dream come true. You can permanently discharge debts, so you won’t ever have to pay those arrearages again. But can you discharge debt and keep the property? What if you have a car and still owe money to a lender on it? Can you discharge the debt and still keep the car?
The Basic Rules Governing Secured Property in Bankruptcy
Because you typically pledge your vehicle as collateral when you get a car loan, the debt attached to your automobile is considered secured debt. You can still discharge the debt associated with that loan, but must remember that it’s only the debt that is affected by the bankruptcy proceeding. A Chapter 7 filing will allow you to permanently rid yourself of your obligation to make payments (within the bounds of the exemptions available under bankruptcy law), but it won’t have any impact on a lien associated with that debt. Accordingly, while you may be able to discharge the principal balance due on your car loan, your lender may still be able to enforce the lien and repossess your car.
Using Bankruptcy to Address a Repossession
If your vehicle has already been repossessed before you file for bankruptcy, the chances of your recovering the vehicle are minimal at best. However, if you still have the vehicle in your possession when you file for protection, the automatic stay will prevent the lender from proceeding with repossession, seeking a deficiency judgment or otherwise attempting to collect the debt on the car. You may also be able to work directly with the lender to minimize the likelihood that they’ll seek to enforce the lien on the vehicle.
Contact an Experienced Rockwall, TX Bankruptcy Attorney
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.
