Your financial situation may have worsened to the point where you are considering bankruptcy as an option. There are always tradeoffs that you must consider when you are seeking protection under bankruptcy laws. Your vehicle can be one thing that you may need to surrender, but it is not always the case. A bankruptcy lawyer in Jersey City at Consumer Law Attorneys can explain how you can keep your car in NJ after filing.
Understanding New Jersey’s Car Exemptions
There are both federal and state exemptions that can apply to your motor vehicle when you are in bankruptcy. Since there is no specific motor vehicle exemption in New Jersey that allows you to protect your vehicle, you will end up relying on the federal exemption. Here, you can protect up to $4,000 in equity in your vehicle. Equity is measured by the overall value of the car minus the amount of money that you still owe. For example, if the value of your car is $10,000, and you owe $6,500 still on the loan, your total equity is $3,500, and your car can be fully protected from any potential forfeiture to the trustee in bankruptcy.
How Chapter 7 and Chapter 13 Differ for Vehicle Ownership
Chapter 7 bankruptcy means that you must surrender certain property to the trustee if it is not covered by an exemption. Your home and your car are the two things that are most at risk to trade off in exchange for the benefits of debt forgiveness. Your car cannot be repossessed during the bankruptcy process, since there is an automatic stay, but you may also be forced to surrender your car to the trustee, who then sells it and uses the assets to pay your creditors.
There is a different treatment of your property in the Chapter 13 bankruptcy process. Since you are making payments on your debt as part of a reorganization plan, you have more leeway to keep your property. Chapter 13 bankruptcy gives you more time to pay your debts and to get current on the car loan payments that you may have missed. Here, you can catch up on missed payments as part of the reorganization plan, while still making your regular monthly payments. If you miss these payments, your car can then be subject to repossession.
Reaffirmation and Redemption Options
Even if your vehicle is protected from the bankruptcy process itself, there is still a potential threat to your vehicle ownership. You must still continue making payments on the car to maintain your ownership. At the conclusion of the bankruptcy process, you must affirm that you intend to continue paying your car loan. If you do not make this affirmation, your vehicle can still be repossessed. You can also lose your car if you do not make payments after you have affirmed the loan.
You can also redeem your car by making a payment of the full market value to the lender. You will elect this option if you owe more than the value of the car, and you do not want to lose it.
In the end, you must make a decision whether it is worth it to keep your car, even if you are allowed to under the law. It could be that the payments may be more than you can afford. If so, you can surrender the vehicle and buy a less expensive one.
Local Help from a Jersey City Bankruptcy Attorney
Before you file for bankruptcy and make an election as to the type of protection you will seek, you must understand the full ramifications of your choice. You can end up losing your car because it is not fully protected. You must understand how the process may unfold in light of your specific situation.
A Jersey City bankruptcy attorney will review the facts of your situation. They will advise you about whether bankruptcy is the best option for your situation, and which form of bankruptcy vehicle protection may work best for you. Once you are in the midst of bankruptcy, your lawyer will work for you to keep your property to the fullest extent permitted by law.
Contact a Jersey City Bankruptcy Attorney
To learn more about whether you keep your car after a bankruptcy in NJ, speak to a Jersey City bankruptcy lawyer at Consumer Law Attorneys. We can explain all of the Chapter 7 exemptions in NJ, along with how Chapter 13 bankruptcy may work in your situation. You can schedule a free initial consultation with a Jersey City bankruptcy attorney by messaging us only or by calling us today at (877) 241-2200. You should never think that you are completely without options, even in the face of a very difficult financial situation.
