Most people know that filing for bankruptcy often results in assets being liquidated to pay down debts. With that said, many Connecticut residents base their understanding of Chapter 7 bankruptcy on what they have seen in movies and television. The truth is there are multiple ways to proceed through a bankruptcy filing, and not all of them involve losing major assets like homes or cars.
Generally speaking, in a Chapter 7 bankruptcy, non-exempt assets will be liquidated to pay down existing debt. However, individuals could find themselves in a position to choose whether to retain or surrender their vehicle. Some experts agree that if payments remain on a car, it may be in the best interest of the debtor to surrender the vehicle. Once the bankruptcy filing is discharged, the debtor is no longer responsible for monthly payments into a loan or lease.
With that said, if an individual wishes to retain his or her vehicle, he or she has two choices. The first, redemption, requires an immediate payout of the value of the vehicle to the lender. The second, known as reaffirmation, is an agreement between the lender and the debtor to pay back the loan on a set schedule that allows the debtor to keep ownership of the vehicle even through the bankruptcy filing. Obviously, each option will work better for some debtors and not others.
This is why it is so important for Connecticut residents considering Chapter 7 bankruptcy to be knowledgeable about the process ahead of time. Seeking out the advice of an experienced bankruptcy attorney can be helpful in this process. Once a clear path has been established, an attorney can help a debtor return to financial health more quickly.
Source: autocreditexpress.com, “Can I Keep My Car In A Chapter 7 Bankruptcy?“, Megan Foukes, Accessed on May 6, 2018