If You’re Facing Bankruptcy and Worried About Your Car, Know You’re not Alone in This Tough Spot.
Filing for bankruptcy can be a stressful experience, especially if you’re concerned about losing your car. So, you probably ask yourself, “Can I file bankruptcy and keep my car in Dallas?” The answer depends on several factors, but the good news is that options are available.
For many people, a car is more than just a way to get from one place to another; it’s essential for getting to work, caring for family, and handling daily activities. With the proper guidance, you can work through this complicated process and keep your car even with an outstanding loan.
Quick Summary:
- Georgia residents facing financial difficulties have two primary options for personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7, often called liquidation bankruptcy, is designed for individuals with limited income and assets. It involves passing a means test, potentially liquidating non-exempt assets and can result in the discharge of many unsecured debts within 4-6 months. However, filers can only use this option once every eight years and must complete credit counseling and financial management courses.
- Chapter 13 bankruptcy, a wage earner’s plan, is suitable for regular-income individuals who need to restructure their debts. This option involves creating a 3-5 year repayment plan to pay off some debts while keeping assets. Chapter 13 has debt limits and income requirements but offers more flexibility in protecting assets and catching up on missed payments. It also protects from foreclosure or repossession if the filer adheres to the repayment plan.
- Both types of bankruptcy offer an automatic stay on collection actions, providing immediate relief from creditor harassment. The choice between Chapter 7 and Chapter 13 depends on factors such as income, assets, types of debt, and long-term financial goals. It’s vital for individuals considering bankruptcy to consult with a qualified attorney to determine the most appropriate option for their specific situation and to navigate the complex legal process effectively.
What are the Types of Bankruptcy in Georgia?
When people face financial difficulties, they often consider bankruptcy as a way to regain control of their finances. In Georgia, there are two main types of bankruptcy that individuals can file: Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, or liquidation bankruptcy, is designed for individuals with limited income and assets. Key aspects include:
- Eligibility: To qualify, filers must pass a means test comparing their income to the Georgia median income for their household size.
- Process: The process typically takes 4-6 months to complete.
- Asset Liquidation: A court-appointed trustee may sell non-exempt assets to pay creditors, which is rare in most consumer cases.
- Debt Discharge: Many unsecured debts, such as credit card bills and medical expenses, can be eliminated.
- Credit Counseling: Filers must complete credit counseling and a financial management course after filing
- Frequency Limit: Individuals can only file for Chapter 7 once every eight years.
Chapter 13 bankruptcy
Chapter 13 bankruptcy, a wage earner’s plan, is suitable for regular-income individuals who must restructure their debts. Key features include:
- Repayment Plan: Filers propose a 3 to 5-year plan to repay some of their debts while keeping their assets.
- Income Requirement: Filers must have sufficient income to make their regular payments and the additional payments to the bankruptcy trustee.
- Debt Limits: There are maximum debt limits for unsecured and secured debts to qualify for Chapter 13.
- Asset Protection: Filers can typically keep their assets, including homes and cars, as long as they continue making payments.
- Duration: The bankruptcy process lasts for the repayment plan, typically 3-5 years.
- Creditor Protection: Chapter 13 can protect the filer from foreclosure or repossession as long as the filer adheres to the repayment plan.
Can I File Bankruptcy and Keep My Car in Dallas?
If you’re worried about losing your car while filing for bankruptcy in Dallas, you’re not alone. Many rely on their vehicles for work, school, and daily activities. The positive news is that options are available to help you keep your car during the bankruptcy process.
General Rules for Keeping a Car in Bankruptcy
When filing bankruptcy in Dallas, Georgia, you can often keep your car, but certain conditions must be met. The primary goal of bankruptcy laws is to provide debt relief while allowing you to retain essential assets, including transportation. Here are some general rules:
- In Chapter 7 bankruptcy, you can typically keep your car if Georgia’s motor vehicle exemption covers its equity.
- In Chapter 13 bankruptcy, you have more flexibility to keep your car, as you can include car payments in your repayment plan.
- You must continue making loan payments if you want to keep a financed vehicle, regardless of the bankruptcy type.
Factors Affecting Your Ability to Keep Your Car
When you file for bankruptcy, several things can impact whether you get to keep your car. These include how much your car is worth compared to what you owe if you’re behind on payments and the type of bankruptcy you file.
Equity in the vehicle
The amount of equity in your car plays a vital role in determining whether you can keep it in bankruptcy:
- Georgia law includes a $5,000 motor vehicle exemption. This exemption applies to the vehicle’s equity, not its total value.
- If your car’s equity exceeds $5,000, you can use Georgia’s wildcard exemption of $1,200 to cover the remaining equity.
- In some cases, you can also apply any unused portion of your homestead exemption (up to $10,000) to protect additional vehicle equity.
Current Loan Status
Your current loan status is another important factor:
- If you’re current on your car payments, you’re more likely to be able to keep your car in bankruptcy.
- For Chapter 7 bankruptcy, the lender may repossess the vehicle if you’re behind on payments unless you can quickly catch up.
- In Chapter 13 bankruptcy, you can include past-due car payments in your repayment plan, allowing you to catch up over time.
Type of Bankruptcy Filed
The type of bankruptcy you file significantly impacts your ability to keep your car:
- Chapter 7 bankruptcy: You can keep your car if its equity is fully protected by exemptions. If you have a car loan, you may need to reaffirm the debt or redeem the vehicle.
- Chapter 13 bankruptcy: This option offers more flexibility for keeping your car. You can include car payments in your repayment plan; in some cases, you may be able to reduce the loan balance or interest rate.
In Chapter 13, if you bought your car more than 910 days (about 2.5 years) before filing, you may be able to pay only the current fair market value of the car instead of the full loan amount. This can significantly reduce your overall payments and make keeping the car more feasible.
Options for Keeping Your Car in Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy in Georgia could allow you to wipe out your unsecured debts, but what about secured debts like a car loan? Whether you can keep your car will depend on several factors, including the value of your vehicle and how much equity you have in it.
When you file for bankruptcy, you don’t automatically lose your car. Here are your options:
- Georgia’s motor vehicle exemption: Georgia’s motor vehicle exemption protects up to $5,000 in car equity when filing for Chapter 7 bankruptcy. This exemption applies to car equity, not value, and can only be utilized for one vehicle if you own numerous. This exemption doubles for married couples filing jointly to $10,000 for a single car. Georgia’s wildcard exemption of up to $1,200 may safeguard vehicle equity over $5,000.
- Surrender the Vehicle: If you can no longer afford the payments, you can surrender your car to the lender. By doing this, you give up ownership of the vehicle, and any remaining balance on the loan could be discharged in your bankruptcy.
- Reaffirm the Loan: Reaffirming your loan means agreeing to continue paying for the car despite filing for bankruptcy. This option is ideal if you want to keep the vehicle and can still afford the payments. However, you will remain responsible for the loan even after your bankruptcy case is over.
- Redemption: Redemption allows you to keep your car by paying the vehicle’s current market value in a lump sum rather than what you still owe on the loan. This is a valuable option if the car is worth less than the amount you owe, but it requires you to come up with the full amount upfront.
Options for Keeping Your Car in Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, you have a better chance of keeping your car than in Chapter 7. Chapter 13 allows you to restructure your debt and create a repayment plan, giving you more flexibility when dealing with secured debts like car loans. Here are your options:
Including car payments in the repayment plan
Chapter 13 bankruptcy allows you to include your car payments in your repayment plan, which can help you keep your vehicle even if you’re behind on payments. Here are some key points:
- You can spread out any missed payments (arrears) over the 3-5 year repayment period, making them more manageable.
- Your regular monthly car payments will be included in the plan, along with the arrears.
- This option allows you to catch up on late payments without risking repossession.
Cramdown option for older car loans
If you’ve owned your car for more than 910 days (about 2.5 years) before filing for bankruptcy, you may be eligible for a cramdown:
- A cramdown allows you to reduce the principal balance of your loan to the current fair market value of the vehicle.
- You’ll only need to pay the reduced amount through your repayment plan, potentially saving you thousands of dollars.
- After completing the plan, any remaining balance on the original loan is discharged.
Lowering interest rates through bankruptcy
Chapter 13 bankruptcy can help you lower the interest rate on your car loan:
- The bankruptcy court can modify your loan terms to reduce the interest rate.
- In Georgia courts, the new interest rate is typically the prime rate on the day you file for bankruptcy, plus an additional 2%.
- This reduction can significantly lower your monthly payments and the total amount you’ll pay over the life of the loan.
Steps to Take Before Filing Bankruptcy
Before you decide to file for bankruptcy, there are some essential steps to take to ensure you’re making the right choice for your financial situation.
Assessing Your Car’s Value
First, find out how much your car is worth. You can use websites or visit a dealership to understand its current value. Knowing this will help you see if you have equity in the car, which is vital for keeping it during bankruptcy.
Reviewing Your Loan Terms
Next, look at your loan agreement carefully. Check the interest rate, how much you pay each month, and any fees you might have. Understanding these details will help you know what you owe and how it fits into your overall debt.
Consulting with a Georgia Bankruptcy Attorney
Talking to a bankruptcy attorney can be very helpful. They can explain the different types of bankruptcy, help you understand your options, and guide you through the filing process so that you can make smart decisions about your finances.
Let’s Figure This Out Together
Facing bankruptcy can be stressful, and you might feel overwhelmed trying to figure out your options, especially when it comes to the question, can I file bankruptcy and keep my car in Dallas? That’s why having an experienced bankruptcy attorney can make a big difference. They know the ins and outs of Georgia’s laws and can take the time to understand your unique situation.
At The Law Office of Jeffrey B. Kelly, we pride ourselves on our experience and dedication. With over 22 years of practice in consumer bankruptcy, we value your time and strive to minimize wait times—so you won’t wait long to see us. If anything comes up during your case, you can speak directly with our bankruptcy attorney. We believe in providing personal attention with kindness and respect.
When you hire us, you’re not just another case but someone we will fight for. If you’re ready to break free from debt, schedule a free evaluation with us today.