Individuals facing financial hardship often have difficult decisions ahead of them. They have to choose how to manage their finances when their income isn’t enough to meet all of their financial obligations. Missing or late payments can lead to fees that worsen their debts.
Eventually, those dealing with imbalanced budgets and unsustainable debt levels may need to consider personal bankruptcy. Filing for bankruptcy may be the best option available if creditors become aggressive about their collection efforts. Those facing foreclosure, repossession or creditor lawsuits often decide to file for bankruptcy.
During bankruptcy, people can seek the discharge of certain debts. In some cases, they may have to liquidate some of their assets before they are eligible for a discharge. Do filers have to worry about losing their vehicles because of a bankruptcy case?
Bankruptcy can help protect a vehicle
In scenarios where people are at risk of vehicle repossession, bankruptcy could potentially save their vehicles. When they file, the automatic stay granted by the courts can delay repossession efforts and other collection attempts. A successful filing that leads to the discharge of certain debts could help an individual catch up on past-due car payments. They can also rework their budget to protect their most important assets.
Of course, some property can be vulnerable during a bankruptcy filing. In a Chapter 7 bankruptcy, individuals may have to liquidate some of their assets before the courts discharge their eligible debts. However, the state does have an exemption in place for personal motor vehicle equity, up to a certain amount.
Individual filers can usually exempt $3,500 worth of vehicle equity from liquidation in a bankruptcy case under state exemptions. Married couples filing jointly can protect up to $7,000 in vehicle equity. They could also choose to use federal exemptions, which may allow a single person to protect up to $4,450 in vehicle equity.
In Chapter 13 bankruptcy cases, people do not have to worry about asset liquidation. They do not have to risk any of their property to secure a discharge. They may also be in a position to renegotiate the terms of a vehicle loan with a lender.
Learning more about the basic rules that govern personal bankruptcy filings can help people protect their assets and avoid life-altering collection efforts. With the right approach and assistance, personal bankruptcy can be useful for those worried about the potential loss of a financed motor vehicle.
