How to File for Bankruptcy and Keep a Vehicle
- 1). Make certain that you own a reasonably priced vehicle. According to bankruptcy law, you are entitled to keep a vehicle even if you file for bankruptcy. The only caveat is that the vehicle must be "reasonably priced." You cannot expect to keep a luxury automobile. If you do have a luxury car, the bankruptcy court will require you to sell it. You will get the chance to purchase a different car in a more appropriate price range. A rough guideline is that an acceptable price range for a vehicle is $20,000 or less, depending on your overall financial situation.
- 2). Within your bankruptcy petition, set aside your car as exempt property that you are entitled to maintain. As you prepare your petition, you will find a section to list exempt property. If you don't include your vehicle on this list, you may run into problems as your case proceeds.
- 3). Advise your lawyer that you want to keep your car. If you are representing yourself, you need to inform the bankruptcy trustee assigned to your case and the lender that has a lien on the vehicle.
- 4). Execute a reaffirmation agreement relating to any outstanding loan on the car you want to keep. In this process, you essentially enter into a new loan agreement with the lender as part of the bankruptcy case.
- 5). Make future loan payments on the vehicle in a timely manner and according to the terms of the reaffirmation agreement. If you don't, your vehicle could be repossessed, even if the bankruptcy court permitted you to keep it.
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