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How does bankruptcy affect my current car loan?
I'm currently going through Chapter 7 bankruptcy. How will this affect my current car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
In Chapter 7 bankruptcy, you may be able to keep your car or
car loan
, but this will vary based on your situation.Most states allow you to exempt certain amounts of your equity in your car loan. Check with your court-appointed trustee to see what the exemption limit is. If you have less equity than the exemption limit, you may be able to keep your vehicle. For example, if the exemption rate is $5,000 for Chapter 7 and you only have $4,500 in equity, you shouldn’t have any problems keeping your car loan.
You can also keep the vehicle if you pay off the loan balance and reaffirm the car loan with the lender. More than likely, you will have to make a lump-sum payment to get your loan up to date and on time and the lender will give you a certain time frame for making the payment.
If neither of these is an option, your trustee will sell the car, give you the exempted amount in cash, and pay off creditors, but this is a worst-case scenario.
In the meantime, you should also look at your car insurance policy to see if you can save money by switching to a different company. Compare quotes from up to 50 insurers with the
Jerry
app and save extra cash for the future.View full answer
- Gregory R.
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