Jun
25
What About Keeping My Car OUT Of My Bankruptcy?
June 25, 2010 | 1 Comment
We spend a lot of time here talking about what you can do to get a car loan AFTER a bankruptcy, but that doesn’t help people who are considering bankruptcy and/or in the process of filing.
Fortunately, Colorado Bankruptcy attorney Michael Wink has offered to give us some advice on the ins-and-outs of keeping a car during bankruptcy. Here are his answers to a couple of questions we asked:
Question #1 – Can I keep my car during bankruptcy?
Very often the answer is “yes,” however, there are some considerations:
Do you have a lot of equity? Depending on what state you file bankruptcy in, there may be a rule that forces you to give up your car if you have more than $5,000 in equity. Remember, equity is determined by subtracting what you owe on your car from it’s current market value.
BankruptcyCarLoans.org editor’s note: It’s rare to have a car with a lot of equity if you have a car loan – most car loans aren’t structured in such a way as to put you in an equity position early. SO, unless you put thousands of dollars down and signed up for a very short term loan, you probably don’t have any equity.
Question #2 – Should I keep my car?
The answer to that question depends on a few things:
1.Can you afford the car payment? A good rule of thumb is that your car payment should only be 10% of your gross income – if your family earns $60,000 per year, then all of your car payments shouldn’t be more than $500 a month. If they’re more than $500, then you probably can’t afford them (at least, that’s what financial experts say).
2.Do you owe more on the vehicle than it’s worth? If you owe $20,000 dollars on a $10,000 vehicle, bankruptcy is your opportunity to fix this problem. Depending on what kind of bankruptcy you file (chapter 7 or chapter 13), you may be able to either give back the car and owe nothing, negotiate a lower payoff, or perhaps even force the lender to reduce your loan amount. Your bankruptcy attorney can advise you on the options.
3.Do you absolutely have to keep the car you have? Some people need a truck for business reasons, or they have such a large family that the only possible mode of transportation might be the family minivan. If you feel like you have special requirements, then you might want to keep your car.
Generally speaking, at Wink & Wink we advise our clients to keep their cars only if they can afford the monthly payment. However, every situation is different, and sometimes our clients simply can’t afford the cars they have and/or they owe far more on the cars than they should. Bankruptcy is a great chance to start over, and for these clients that means starting over with a different car.
Special thanks to attorney Michael Wink of Wink & Wink, P.C. for taking the time to answer some questions!
Related Posts
Comments
1 Comment so far
its a good option for who don’t have more monthly income so people can afford the car payment.