One of the most common concerns people have when considering Chapter 7 bankruptcy is whether they will lose their car. For many, a car is essential for commuting, running errands, and maintaining daily life.
Can You Keep Your Car in Chapter 7 Bankruptcy?
The short answer is: Yes, you can often keep your car. However, there are a few conditions to be aware of:
- Current on Payments: If your car is financed, you need to be up to date on your car payments. The finance company is more interested in receiving your payments than repossessing your car.
- Adequate Insurance: Ensure you have adequate insurance coverage on your vehicle.
- Reaffirmation Agreement: You may need to enter into a reaffirmation agreement with your lender, which essentially recommits you to the car loan under the same or modified terms.
What About the Chapter 7 Trustee?
The Chapter 7 trustee is primarily concerned with assets that have significant equity. In Illinois, you are protected by state exemptions. Specifically, you can keep your car if its equity (the car’s value minus any loan balance) is less than $6,4001. Realistically, a trustee will not pursue selling a car unless it has a much greater value.
You can use online resources like Kelley Blue Book or Edmunds to estimate your car’s trade-in value.
Key Points to Remember
- Stay Current on Payments: Make sure you are not behind on your car payments.
- Insurance: Maintain adequate insurance coverage.
- Equity Limits: Ensure your car’s equity is within the Illinois exemption limit.
Consult with an Experienced Bankruptcy Attorney
Navigating bankruptcy can be complex, but you don’t have to do it alone. At ROBERT J ADAMS & ASSOCIATES (also known as The Bill Slayer), we offer free consultations to help you understand your options and ensure you can keep your car.