Filing for bankruptcy in New York often involves a car. Though many New York City residents use the subway or the bus to get back and forth, people with children or who work outside of the main transportation areas (for some reason, most of Queens falls into this category) frequently have a car.
And when it comes down to a decision about filing for bankruptcy, that car becomes an issue.
Luckily, there are some options when you’re trying to protect your automobile and get out of debt at the same time.
The first thing you want to think about is Chapter 7. If the value of your equity in the car falls within the Chapter 7 exemption guidelines then you’ll be able to keep the automobile, wipe out the unsecured debt and move on from there.
A word of caution, though. If you’ve got a car loan and file for Chapter 7 bankruptcy, you’re going to have an extra layer of complexity in the form of reaffirmation. Your lender may force you to sign a reaffirmation agreement in order to keep the car after discharge, and this creates a host of potential issues. Be sure to chat with your bankruptcy lawyer before making a decision.
If your equity is too great to protect in a Chapter 7, you may want to look at Chapter 13. This is going to give you the opportunity to pay back a portion of your debts over a 3-5 year period. And before you go telling me that you’re not looking to pay back the debts if you’re going to be filing for bankruptcy, consider this – Chapter 13 will let you keep the car as well as everything else you own.
So looking at it through that lens, repaying a portion of the debts off over time in exchange for keeping the vehicle isn’t that bad of an idea.
If you’re looking at filing for bankruptcy, there’s one solution that is absolutely wrong for you – and that’s selling or transferring the car. When you transfer property of any kind, you’re going to need to report that to the bankruptcy trustee. If the transfer was made within a certain period of time it will be suspicious and may land you in a heap of trouble. You can go through that scenario with your lawyer, but trust me – you don’t want to.
Photo credit: U-g-g-B-o-y-(-Photograph-World-Sense-) (via Flickr).