If you are in Minnesota and are contemplating filing for bankruptcy, one of the significant concerns you may have is whether you can keep your vehicles. In America, our cars and trucks are vital to our lives and livelihood, so the idea of losing your means of transportation is understandably concerning. Answer the question “Can I keep my vehicle if I file for bankruptcy” depends on certain factors, including the type of bankruptcy you file, the value of your vehicle, and the nature of your loans associated with the car/truck.
An examination of the rules and regulations governing bankruptcy as it concerns your vehicle will allow you to decide about filing for bankruptcy.
Types of Bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, allows the debtor to relinquish non-exempt assets in exchange for the forgiveness of unsecured debts. In the case of owning a vehicle, the debtor may choose to surrender the vehicle so any outstanding car loans will be discharged. However, if the vehicle is essential for work or daily life, the debtor may attempt to reaffirm the loan and keep the vehicle.
Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows the debtor to create a repayment plan over a period of three to five years to pay off their debts. In this case, the debtor can choose to keep their vehicle and continue to make payments on it, as long as the payments are included in the repayment plan.
Minnesota Exemptions for Vehicles in Bankruptcy
In Minnesota, there are certain exemptions that allow individuals to keep their vehicles even if they file for bankruptcy. The motor vehicle exemption allows filers to keep up to $5,000 in equity in their car or another motor vehicle. It’s worth noting that this is not a flat $5,000 exemption. Rather, it’s an exemption in equity. For example, if your car is worth $10,000, but you still owe $7,000 on the loan, your equity in the car is only $3,000, so you could exempt that amount under this exemption.
Secured vs Unsecured Loans
There is a significant difference between secured and unsecured loans, with the most significant factor being collateral. Secured loans, such as auto loans, are backed by collateral such as a car, house, or other valuable asset. In contrast, unsecured loans do not have any collateral to back them up, such as credit cards.
Secured loans offer a better chance of approval for those with credit issues, as lenders can seize the collateral in case of bankruptcy. In some cases, depending on if your car is used as collateral, you could be ordered to surrender it in a bankruptcy filing. A qualified bankruptcy lawyer, like Bill Kain and Margaret Henehan of Kain + Henehan law firm, can discuss the likely outcomes for you based on your individual situation.
Why Surrendering May Be the Best Option in Some Cases
When filing for bankruptcy, it’s crucial to understand your options for managing your debt. One option that may actually be the best choice, believe it or not, is surrendering your vehicle. While giving up your car can be emotionally difficult at the moment, in the big scheme of things, it can be a practical decision that provides you with benefits you may not have if you try and hang onto that car. One immediate benefit is you eliminate the monthly burden of a heft loan payment.
Also depending on your specific case, you may be able to discharge any remaining balance on the loan after surrendering the vehicle. Getting rid of the vehicle debt can free up funds to put toward other expenses, such as your mortgage or utilities, including buying a less expensive reliable car. It’s important to consult with a bankruptcy attorney to understand the implications of surrendering your vehicle in your specific situation.
Schedule a Consultation With a Minnesota Bankruptcy Lawyer
If you’re struggling with debt and are considering bankruptcy, it’s important to get guidance from an experienced bankruptcy lawyer. In Minnesota, Kain + Henehan is a trusted boutique bankruptcy law firm serving all of Minnesota. They provide assistance with filing for bankruptcy, negotiating with creditors, and understanding the legal process. They believe facing the prospects of bankruptcy can be scary enough, so meeting with them should not be. Bill and Margaret want to make you comfortable from the very first phone call. Their process for filing bankruptcy is only 4 efficient steps including Step 1: a free 60 minute consultation that can be done virtually, via phone, or in-person.
If you’re facing car repossession or foreclosure, Kain + Henehan can help you determine whether keeping your vehicles is the right thing to do. To schedule a consultation with a Minnesota bankruptcy lawyer, contact Kain + Henehan by calling (612) 438-8006 or filling out the online form.
