Keeping Your Car & Filing Bankruptcy In Arizona

Will Filing For Bankruptcy Allow Me To Keep My Car?

Many people believe that they are not allowed to keep any assets if they declare bankruptcy in Arizona. And especially for those who rent their homes, one of the most important assets in question would be their vehicles. There isn’t really a short question to whether or not you will be able to keep your vehicle if you file bankruptcy in Arizona. Additionally, there are several factors that will go into the answer to this question – the chapter you file, how much your car is worth, whether you’re current on payments, and more. This could be a deciding factor in whether you file bankruptcy. Read on to learn more about your options to keep your car in an Arizona bankruptcy filing. For your free consultation with one of our skilled Mesa, Tempe, and Tempe chapter bankruptcy lawyers, call 480-405-1010. The lawyers at Chapter Bankruptcy Lawyer offer free consultations, Zero Down bankruptcy filing options, and bankruptcy by phone options.

Arizona Chapter 7 Bankruptcy Vehicle Exemptions

If you own your car in full or are current on your auto payments, you might want to discharge your other debts using Chapter 7 bankruptcy. The Bankruptcy Code doesn’t allow for Chapter 7 bankruptcy debtors to hold onto overly valuable assets that could be sold to pay debts. Bankruptcy exemptions represent how much equity you can hold in certain categories of assets without the risk of the trustee seizing them to sell and pay your debts. Arizona only allows bankruptcy filers to use state exemptions, without the option of using federal exemptions instead. Therefore, you should contact an experienced Chapter 7 Bankruptcy Attorney with additional questions.

In Arizona, the motor vehicle exemption for an individual is $6,000. If you are unmarried, you still may be able to keep a vehicle worth more than $6,000 in a Chapter 7 bankruptcy. For example, if your vehicle is worth $18,000, but your loan has a balance of $15,000, you only have $3,000 equity in the vehicle, and it will be exempt in a Chapter 7 bankruptcy. If you are married, the motor vehicle exemption in Arizona slightly shifts. You can either share a vehicle with up to $12,000 equity, or each have a vehicle with no more than $6,000 equity and keep them protected in an Arizona Chapter 7 bankruptcy. If you have a disability that requires special equipment in your vehicle, the exemption increases to $25,000.

Redemption Vs. Reaffirmation- What To Do With Your Vehicle In Bankruptcy In Phoenix, AZ

If you financed your vehicle, and it isn’t paid off yet, you will need to address this in your bankruptcy. Some people choose to surrender their vehicles, but you also have the option of redeeming or reaffirming your loan.

Even if you are current on your auto payments, your vehicle lender may still require you to sign a reaffirmation agreement in a Chapter 7 bankruptcy. This is to confirm that you will continue making payments on your vehicle despite discharging the rest of your debts in bankruptcy. The lender’s preference will obviously be for you to continue paying as per the terms of the original loan. However, this is your opportunity to negotiate better terms, such as a lower principal balance or a lower interest rate. The bankruptcy court will be more likely to sign off on a reaffirmation agreement with better terms for you. Contact your bankruptcy attorney for more information about negotiating a reaffirmation agreement for your vehicle.

A redemption allows you to buy your vehicle in full by paying its market value, not the amount you currently owe. This is set forth by Section 722 of the Bankruptcy Code.

There are five requirements to qualify for a 722 redemption:

The vehicle in question is collateral for a secured debt;
The property is tangible and personal property, as opposed to real estate;
Your Chapter 7 trustee opts to abandon the vehicle;
The vehicle loan is a personal loan, not a business loan; and
You can pay the vehicle’s full market value in a lump sum payment.

If you owe more on your vehicle than it’s worth but would still like to keep it, a redemption may be a great option for you. But the problem is, most people pursuing a Chapter 7 bankruptcy don’t have enough cash to pay off their vehicle in a lump sum. That’s why our firm works with lenders that can help you pay off that lump sum payment and continue paying for your vehicle with a much lower principal balance, interest rates, and monthly payments. You can find more information at 722 Redemption.

Should I Just Surrender My Vehicle If I Am Declaring Bankruptcy In Arizona?

The truth of the matter is, not every vehicle is worth saving in a Chapter 7 bankruptcy. Whether it has several mechanical issues or it no longer suits your family’s needs, bankruptcy also offers an opportunity to surrender a vehicle that has become a burden. And unlike what many of our bankruptcy clients initially believe, you actually can finance a new vehicle on better terms shortly after filing your bankruptcy. Contact our firm for your free consultation to discuss whether it would be worthwhile to surrender your vehicle in bankruptcy.

What Is The Difference Between Chapter 7 & Chapter 13? Can It Help Me Keep My Car?

When you have too many financial resources to qualify for Chapter 7 bankruptcy, Chapter 13 bankruptcy might be a good option to help you resolve your debts and also keep your vehicle. This is because Chapter 13 bankruptcy is a reorganization payment plan meant for people who have steady income but still struggle with debt. It can also be an effective tool if you are behind on your auto payments and facing a repossession.

If you file Chapter 13 bankruptcy, your payment plan will last either 3 or 5 years, depending on how your income compares to Arizona’s median income. All of your secured debts must be paid off in full during your payment plan, with the exclusion of some home mortgages. This will also include any balance in arrears on your car loan. So at the end of a Chapter 13 payment plan, not only will you be current on your car loan, but it will be completely paid off. In most cases, you will be protected from repossession by your vehicle lender as long as you stay current on your bankruptcy plan payments. The automatic stay will protect you from vehicle repossession and other forms of creditor collection while in place.

Our Arizona Bankruptcy Team Can Help You Save Your Vehicle & More

One of the biggest considerations in your bankruptcy may be whether you should keep your vehicle. Our Arizona bankruptcy lawyers can give you honest advice on whether bankruptcy can help you save your vehicle, and which way will be the most efficient way to do so. Bankruptcy might secure better terms for your loan, or even give you access to a better vehicle altogether. And all of these benefits may actually be way more affordable than you think. Our Chapter bankruptcy Lawyers offer post-filing bankruptcy payment plans starting as low as $0 down for qualified clients. Protect your vehicle and the rest of your assets, all while getting your financial situation back on track. Learn more today by using our online form or calling 480-405-1010 to schedule your free consultation with one of our dedicated Chapter 7 and Chapter 13 Arizona bankruptcy lawyers.