Many people wonder if they can keep their car in bankruptcy. In Oklahoma, understanding the rules and exemptions related to vehicle ownership during bankruptcy can help you make informed decisions and navigate the process more confidently. First and foremost, it’s important to understand the two primary types of bankruptcy available to individuals: Chapter 7 and Chapter 13. The type of bankruptcy you file will significantly impact whether you can keep your car.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves selling off non-exempt assets to pay creditors. However, Oklahoma law provides specific exemptions that protect certain assets from being liquidated, including your vehicle. The truth of the matter is that the exemptions in Oklahoma are some of the most generous in the country. For those of us with normal assets like a car, home or retirement accounts you keep all of your assets.
Under Oklahoma law, you can exempt up to $7,500 of equity in one motor vehicle. Equity is the difference between your car’s value and the amount you owe on it. The cars value is that value the car sells for at close to wholesale. For example, if your car is worth $10,000 and you owe $3,000, you have $7,000 in equity, which falls within the limit. As a result, you would be able to keep your car.
If your equity exceeds the exemption limit, you might keep your car by paying the trustee the excessive amount. Alternatively, you could negotiate a reaffirmation agreement with your lender to continue making payments under the original loan terms. Reaffirmation agreements are very common and are part of most bankruptcy cases in Oklahoma.
Chapter 13 Bankruptcy
On the other hand, Chapter 13 bankruptcy involves creating a repayment plan to pay off your debts over three to five years. This type of bankruptcy allows you to keep your assets, as long as you adhere to the approved repayment plan.
In a Chapter 13 bankruptcy, you can include your car loan in the repayment plan. This means you continue making payments through the plan, which can sometimes include renegotiating the loan terms to make them more favorable. As long as you keep up with your payments, you can retain possession of your vehicle.
Redemption and Reaffirmation to Keep Your Car in Bankruptcy
Moreover, regardless of the bankruptcy chapter, you have options like redemption and reaffirmation to keep your car. Redemption allows you to buy your car from the lender at its current market value, which can be beneficial if your car’s value is less than what you owe. Reaffirmation involves agreeing to continue paying your car loan under the original terms, thus keeping the car out of the bankruptcy proceedings. In a chapter 7 bankruptcy, before you can reaffirm a debt you must be current on the payments. A chapter 13 allows you to file even when you are not current on the payments but this kind of bankruptcy is very different from a chapter7.
Claremore Bankruptcy Attorneys
To ensure you can keep your car during bankruptcy, take several practical steps. First, accurately assess your car’s value and the equity you have in it. This information is crucial in determining whether you fall within the exemption limits. Next, seek legal counsel to guide you through the process and help you understand your rights and options. This approach allows you to move forward with greater financial stability and peace of mind. If you’re filing or considering filing bankruptcy, call us at Claremore Attorneys by calling 918-379-4872 or online for a consultation.
