HOW TO KEEP YOUR CAR AND TRUCK IN BANKRUPTCY

Martin Long • Mar 05, 2021

HOW TO KEEP YOUR CAR AND TRUCK IN BANKRUPTCY

The ability to keep your car or truck in bankruptcy is often a major consideration when filing a Chapter 7 or Chapter 13 bankruptcy. A dependable vehicle is often essential to keeping a job or getting the kids to school.

Fortunately, in a Chapter 7 bankruptcy, you can almost always keep your car or truck if you are up to date on monthly car payments and the value of the vehicle is within the exemption amount. By contrast, in a Chapter 13 bankruptcy, you can also keep your vehicle even if you are behind in payments. Also, you may be able to get the bankruptcy court to order a reduction in the amount owed.

KEEPING YOUR CAR IN A CHAPTER 7 BANKRUPTCY

The first item to consider is how many vehicles you own that you wish to keep. In Colorado, you can exempt up to two vehicles with a $7,500 total exemption. However, if the person or person’s spouse is 60 years of age or older, disabled, or the person’s dependent is disabled, the exemption is increased to a $12,500 total exemption. If filing jointly, the exemptions are doubled. So, if one person is filing bankruptcy and that person has two vehicles, one worth $5,000, and one worth $2,500, then you divide the exemption between the vehicles based on their values and keep them both. Similarly, if you own one vehicle worth $20,000 and owe $12,500 on it, you apply the $7,500 exemption and may keep the vehicle so long as you are current on payments and continue to be so. In many cases, there is no equity in the vehicle. In that case, you merely keep making the payments on the car or truck.

If there is significant equity beyond the vehicle exemption amount, I direct clients to obtain an estimated auction value from a local auctioneer. I then review it before filing for bankruptcy. The auctioneer usually charges 15% of the auction price. I may offer to pay the bankruptcy trustee the amount that may be realized in an auction, less auction costs and loan payoff. Most trustees will accept a reasonable payment plan.

What if you are upside down on a car? In many cases, a debtor can pay the lender the value of the vehicle, and nothing beyond. This is known as redeeming, or redemption of, the vehicle.

KEEPING YOUR CAR IN A CHAPTER 13 BANKRUPTCY

In a Chapter 13 bankruptcy, there are even more options available to keep your vehicle. In Chapter 13 you do not have to be current on your car payments at the time you file. So long as the vehicle has not been repossessed, you can take the past due payments, the arrearage, and pay it over time through the Chapter 13 Plan. However, you must also timely pay future monthly payments during the Chapter 13 Plan.

In addition, in Chapter 13 you may be able to reduce the amount owed on a vehicle to its market value and use the Chapter 13 Plan to pay off the vehicle at the reduced amount. This is known as a cramdown. One of the cramdown requirements is the security interest on the vehicle was not incurred within 910 days (about two and a half years) prior to the bankruptcy filing.

Have your financial situation and the myriad ways to keep your car considered by an experienced bankruptcy attorney and former Trustee for the U.S. Bankruptcy Court. Call or contact Martin Long of LONG & LONG P.C.now at 303-832-2655, or www.denverbankruptcylawyer.net.

LONG & LONG P.C.

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A joint petition is when a married couple together files a single bankruptcy case. Unless noted otherwise in the statutes, if a married couple files jointly in Colorado, each spouse may claim the full amount of each exemption. The favorable effect of this is that the couple can claim twice the amount of exemptions. Unmarried couples, partnerships, and corporations must file separate petitions. If you are an individual and have a business entity, such as an LLC or a partnership, you cannot file a single petition for yourself and that business. In such a case you will note your interest in your company in your individual filing, e.g., John Doe, a member of Doe, LLC. If you are a sole proprietor, however, you may include your 100% ownership of the business in your individual bankruptcy. Once a joint petition is filed, all property and debts between the two individuals in the marriage become part of the bankruptcy filing. Sometimes it may be advisable for one spouse to file a petition alone and without the other spouse. An example is when the debts are owed only by the filing spouse, and not the non-filing spouse. Though the non-filing spouse is not part of the bankruptcy, information regarding the income of the non-filing spouse must be included in the filing spouse’s statements and schedules. Why, you ask? Because the income from the non-filing spouse given for the benefit of the filing spouse may mean the filing spouse has the means to pay some of the debt. The Bankruptcy Process You can start the bankruptcy process by filing a petition with the bankruptcy court serving your area. In addition to the petition, you must also file with the court (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. In addition, you must provide the assigned trustee with a copy of the tax return or returns for the most recent year as well as tax returns filed during the case. These documents must be provided for both husband and wife. Creditors Meeting Between 21 and 40 days after the filing date, the trustee will call a meeting of your creditors. In the case of a joint petition, both husband and wife must attend the creditors’ meeting and answer questions regarding their financial status and property. Within ten days of this meeting, the trustee will communicate to the court whether the case should be presumed to be an abuse under the "means test". Benefits Of Joint Bankruptcy Filing There are benefits to filing jointly. You will save on filing fees, as the fee is the same for both as it is for one. Filing jointly will often give the couple a greater chance of keeping their property because of the “doubling” of exemption amounts; However, in Colorado the homestead exemption amount is not doubled with a total maximum at the time of writing of $75,000, or $105,000 if 60 or over or disabled. In addition, joint filing will save the married couple a lot of time. Determining whether to file together or separately, whether to file for chapter 7 or chapter 13 bankruptcy, and ensuring the protection of as much of your property as possible is a complex process. Each couple’s situation is different, so it is important that a married couple considering a joint or individual petition consult an experienced Bankruptcy Attorney. As a former trustee for the U.S. Bankruptcy Court, with over thirty years experience, Attorney Martin Long is an expert in the industry with decades of experience in Colorado . We also serve Aurora, Centennial, Highlands Ranch, Denver, Lakewood, Englewood, Littleton, Castle Rock, Colorado and the Denver metro area with three convenient locations. For help with your financial matter, call the Law Office of Long & Long for a free initial consultation at 303-832-2655 .
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