What Happens to Your Car Loan if You File Chapter 7?
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Car Loan Chapter 7

One common question many potential bankruptcy filers have is what will happen to their car loan in a Chapter 7 bankruptcy. And it's an important question: many people need to keep their cars in order to keep working.

Every case is unique. Speak with a bankruptcy lawyer right now about your car loan and potential Chapter 7 bankruptcy filing:

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Car Loans and Chapter 7 Options

If you decide to file for personal bankruptcy, there are generally three options for determining how to handle a car loan in a bankruptcy. Specifically, these car loan Chapter 7 options include the following:

  • Renewing the loan: The first choice is to re-commit to the car loan you currently have. This involves confirming with your lender that you plan to continue making payments as usual for the duration of your Chapter 7 case, and beyond. In general, this should work for people with affordable car loans who need their cars for transportation to and from work and have no other reasonable option (such as public transit or a bicycle).
  • Redeeming the vehicle: A second option for a car loan in Chapter 7 bankruptcy may be to pay to your lender a lump sum for the value of your car that remains to be paid. Note that you may not have to pay the entire remainder of your loan, only your car's current value. This can be a long-term savings measure (as you'll escape paying some interest), but some filers may not have the means to make such a lump payment.
  • Surrendering the car and loan: A third option for dealing with car loans in Chapter 7 is to surrender both your vehicle and what you owe. In other words, you would give the vehicle back to your lender and no longer owe anything on your loan. For someone has an alternate form of transportation, this may be a workable solution, as it could save the expense of both paying for and maintaining a car.
You can discuss these options with a bankruptcy lawyer before making any decisions. You can also ask your lawyer whether Chapter 7 is the best option for you given your situation. Some filers may find that Chapter 13 bankruptcy provides a more workable solution for handling their automobile loan.

Connect with a Bankruptcy Lawyer Today

So how can you determine which option could work best for your finances? No two bankruptcy cases are the same, so you may want to consult with a bankruptcy lawyer about how to best handle your car loan to improve your financial situation. If you’re ready to figure out how to handle your car loan in Chapter 7 bankruptcy, you can connect today with a bankruptcy lawyer practicing in your area.

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This is for informational purposes only and is not legal advice. For legal advice on your particular situation, speak to an attorney in your area.

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