Chapter 7 Bankruptcy in Akron & Cleveland
During a Chapter 7 bankruptcy in Akron, the Ohio motor vehicle exemption helps determine if you can keep your vehicle. The Trustee cannot take and sell your car, truck, or van if its equity is less than Ohio’s exemption amount of $3,675. If your vehicle’s equity is exceptionally more than $3,675, the trustee may try to take your vehicle and sell it to pay your unsecured creditors. If the Akron Bankruptcy Trustee finds equity in your vehicle, we can also try to “buy out” the trustee’s equity to avoid giving up the vehicle.
You have equity in your car if its worth more than you owe. Equity is the difference between your car’s value and the balance owed on the car. Check kbb.com to get the current market value of your car and subtract your loan payoff amount (what you owe). If it’s less than $3,675, then you can simply choose to keep your car.
Even if your car is safe from the Trustee in your Akron bankruptcy case, meaning it’s equity value is less than $3,675, your lender may be able to repossess your vehicle during or after your bankruptcy if you fall behind on payments.
Akron bankruptcy attorney, Dean Paolucci will map out every possibility regarding your vehicle and your Chapter 7 bankruptcy.
If you’re eligible to keep your vehicle:
Filing for Chapter 7 bankruptcy in Akron, Ohio allows you to make a decision about your car or truck if you’re eligible to keep it. You have the option to keep your car, surrender it (give it back to the lender, stop making payments, and never be responsible for another payment ), or negotiate with your lender to keep your car with the existing payment terms or new payment terms.
If you’re unsure, our bankruptcy attorney, Dean Paolucci will help you decide what’s best for your financial situation. Once a decision is made, we’ll let the Akron bankruptcy court know what you’d like to do with your vehicle by filing an official form called the Statement of Intention. In addition, we’ll send this document to your lender so they know what to expect.
OPTION 1: Keeping a car or truck you’re still paying for:
There are different ways to keep your car during and after your bankruptcy. At any rate, if you want to keep your vehicle, continue making regular payments while you and our bankruptcy attorney decide how you’d like to keep your car:
A) KEEP YOUR VEHICLE THROUGH REDEMPTION: Sometimes, you can choose to pay your lender a lump sum to purchase the vehicle at it’s current value.
Example of Redemption in an Akron Chapter 7 bankruptcy:
Roxie files Chapter 7 Bankruptcy. She owes $15,000 on her car but knows the actual market value is quite a bit less. Kelley Blue Book lists the retail value of her car at $7,000. On her Statement of Intention, we state that Roxie intends to redeem her vehicle and offers the lender $7,000. The lender disagrees about the condition of the vehicle and thinks Roxie should pay more. They go to court. The judge determines the retail value is $7,500 and Roxie pays a lump sum of $7,500 to the creditor, the debt is marked paid in full. Roxie keeps the car with a clear title.
Redemption of your vehicle is difficult because you have to come up with cash to pay your creditor and if you’re filing bankruptcy, you probably don’t have easy access to cash. However paying to redeem your vehicle would be far less money overall than if you continued making payments under the original loan term and you continue your life without a car payment. Another thing to note is that agreeing on the valuation of your vehicle might become timely if you have to go to court and costly due to extra attorney fees.
B) KEEP YOUR VEHICLE THROUGH A REAFFIRMATION AGREEMENT: If you choose to reaffirm you vehicle, you agree to be legally obligated to pay the debt despite your bankruptcy. You and your lender enter into a new contract agreement which let’s you keep your vehicle under similar terms as your original promissory note, although we can try to negotiate this new contract for lower monthly payments. Remember, if you fall behind on your reaffirmed debt, you could start to get collection calls again, be sued, or wages garnished.
C) KEEP YOUR VEHICLE UNDER OLD AGREEMENT: In some cases your lender will let you keep your car or truck without entering into a reaffirmation agreement, by allowing you to CONTINUE TO MAKE PAYMENTS UNDER THE OLD AGREEMENT. If your lender has been accepting your payments, it's a good sign that you may be able to keep your vehicle and continue making payments without entering into a new reaffirmation agreement.
If you own your car, truck or van outright (your name must be on the title), you can keep it if it’s equity is valued below the Ohio’s exemption amount of $3,675. We can help you determine the value and help make sure you keep your vehicle.
However, if you’re filing Chapter 7 bankruptcy in Akron or Cleveland, Ohio with a spouse, they can use the Ohio motor vehicle exemption (valued at $3,675) on one other car if it’s in their name. Do not make any title changes before you file bankruptcy without advice from Akron bankruptcy attorney, Dean Paolucci.
In most situations, we'll help you keep your cars.
OPTION 2: Surrendering and walking away from your car or truck:
If you want to walk away from your vehicle and auto loan when you file Chapter 7 bankruptcy, we’ll state that you intend to surrender the car, truck, or van on your Statement of Intention. You will turn your vehicle over to the lender when the time comes. This Statement of Intention will clear you of any further liability of your auto loan after your Chapter 7 bankruptcy. If you have a lease, you can get out of the lease by rejecting the lease on your Statement of Intention.
If you have a loan or a lease and decide to keep your car or truck, continue making payments while in bankruptcy and after bankruptcy until the loan is paid in full or your lease is done.
For more specific questions about your financial situation and vehicle, call us, we’ll give you options.
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