20 Feb Common Questions About Keeping Your Car During Chapter 7 Bankruptcy in Queens
Are you considering Chapter 7 bankruptcy but worried about losing your car? You are not alone. Many people in Queens depend on their vehicles to get to work, take kids to school, or run daily errands. It is understandable to feel uneasy about the possibility of having to give it up.
The good news is that New York law offers ways to help you keep your car in many cases. Below, we will discuss common questions about retaining a vehicle in Chapter 7 and why talking to a Queens bankruptcy lawyer can make all the difference.
What Is Chapter 7 Bankruptcy?
Chapter 7, sometimes called “liquidation bankruptcy,” helps people who cannot pay their debts. When you file for Chapter 7, most unsecured debts—like credit card bills and medical expenses—can be wiped away. This fresh start can give you the breathing room you need.
However, one concern for many people is what happens to their property, especially their car. In Chapter 7, a trustee can sell some assets to pay your creditors. However, exemptions under New York law can protect certain property, including your vehicle, so you may not have to give it up.
Can You Keep Your Car if You File Chapter 7 in Queens?
Often, yes. In New York, specific laws let you protect one motor vehicle up to a certain amount of equity. If you are using New York bankruptcy exemptions, an individual debtor living in New York can exempt (keep) one car with a value not exceeding $5,500 above any liens. If you are disabled and have a specially equipped vehicle, you may exempt up to $13,625 above any liens. If you use the federal bankruptcy exemptions, you will be allowed up to $4,450 in equity, with an additional wildcard exemption of $1,475 plus up to $13,950 of any unused portion of your homestead exemption.
This means if you owe more on your car than it is worth, or if you only have a few thousand dollars in equity, your car might be safe. A Queens bankruptcy lawyer can help you figure out if your car fits under the New York or Federal exemption limits, and if it does, you can likely keep driving it even after your bankruptcy is done.
What If Your Car Is Financed?
Financing a car is common, especially in a busy place like Queens, where reliable transportation is important. If you have a car loan, you can still keep your vehicle if you remain current on your payments.
You usually have to decide between:
- Reaffirming the Loan: This means you sign an agreement stating you will continue to pay the loan under the original terms (or slightly adjusted terms). Reaffirming keeps the lender from repossessing the car after your bankruptcy, but you become responsible for the loan again.
- Redeeming the Vehicle: If you have the money to do so, you can pay your lender the car’s current market value in a lump sum. Once you pay, the car is yours, free of that debt. This can be helpful if your car is worth less than what you owe.
Either way, you should talk to a Queens bankruptcy lawyer before deciding. They can help you see if the deal is in your best interest and will not create new financial problems.
Does the Car Exemption Apply If the Car Is Leased?
A car lease is a bit different from an auto loan. When you lease, you do not actually own the vehicle; you are just renting it long-term. Sometimes, you can keep a leased car by continuing the payments during and after the bankruptcy. However, it is not considered your property in the same way a car with a lien is.
If you want to keep a leased car, you usually need to “assume” the lease, which means you continue making payments according to the lease terms. A Queens bankruptcy lawyer can look at your lease agreement and help you figure out if assuming it is the right move.
How Does the Automatic Stay Protect Your Car?
One of the biggest advantages of filing for Chapter 7 is the “automatic stay.” The moment you file your paperwork, most collection actions against you must stop. That includes repossessions. If you have fallen behind on your car payments, the lender can no longer repossess your vehicle unless they get special court permission. This automatic stay continues while your bankruptcy is active, giving you time to sort out your next steps.
If you plan to keep your car, you can use that time to file exemption claims and possibly reaffirm the loan. The automatic stay can be a powerful tool for stopping immediate repossession, but it does not last forever. That is why working quickly with a Queens bankruptcy lawyer is advised to protect your rights during this window of opportunity.
What Happens If Your Car’s Value Exceeds the Exemption Limit?
Sometimes, people own a vehicle worth more than $5,500 in equity (or $13,625 if specially equipped for a disabled person). If that is your situation, it might be harder to keep the car without adjustments.
You have a few options:
- Pay the Trustee the Non-Exempt Amount: If the vehicle is worth $10,000 in and the New York exemption is $5,500 is utilized, you can offer to pay the remaining $4,500 in a lump sum or through a payment plan. If successful, you can keep the car.
- Negotiate with the Trustee: In some cases, you can work out a settlement that allows you to keep the car if you pay a portion of the unprotected equity.
- Allow the Car to Be Sold: If you cannot reach an agreement, the trustee could sell the vehicle, give you the exempt portion of the money, and use the rest to pay creditors.
It can be stressful to face the idea of losing a car with substantial equity, but a Queens bankruptcy lawyer can guide you through negotiations to see if you can hang on to it.
Does the Type of Bankruptcy Matter for Keeping Your Car?
Yes. In Chapter 13 bankruptcy, you generally keep more control over your assets because you are agreeing to a repayment plan. Chapter 7 can be quicker and involves discharging unsecured debts without a payment plan, but there is often a deeper review of your non-exempt assets.
Some people who cannot protect a car under the Chapter 7 exemptions choose to file for Chapter 13 instead, allowing them to catch up on any missed payments over time. A Queens bankruptcy lawyer can look at your total situation—debts, income, car value, and other factors—to help you decide which chapter makes more sense.
What If You Are Still Financing Your Car After Bankruptcy?
Even if your bankruptcy is discharged, you might still owe money if you reaffirmed a car loan or assumed a car lease. That means you must keep making payments on time if you want to keep the vehicle. Missing future payments could lead to repossession just as it would outside of bankruptcy.
If you run into new financial challenges, it might be wise to revisit your options before falling behind. Talking to a Queens bankruptcy lawyer early can help you avoid losing your car or facing new legal problems.
Will Bankruptcy Affect Your Ability to Get a Car in the Future?
A Chapter 7 filing does appear on your credit report for up to 10 years, which may make it tougher to get a new car loan in the short term. However, it is not a permanent obstacle. Many lenders are willing to work with people who have a bankruptcy in their past, especially if you are consistent about paying your bills on time after your case closes. Rebuilding your credit after bankruptcy can lead to better interest rates and more choices down the road.
Ready to Keep Your Car and Move Forward? Contact Our Queens Bankruptcy Lawyers Today
If you are concerned about losing your vehicle in a Chapter 7 bankruptcy, reach out to us at Poltielov & Habib, LLP. A Queens bankruptcy lawyer from our firm will explain your rights, discuss the exemption rules, and help you take the right steps to protect your assets. We offer a free, strictly confidential consultation so you can understand your best options without feeling pressured.
Call (718) 520-0085 or contact us online now to get started on your path to financial freedom while keeping the car you rely on every day.