bankruptcy 7 or 13?

[Sandra]

If I have 2 cars both being financed by the same auto dealer, if I file bankruptcy can he take either of the cars back before a decision on my bankruptcy has been made?

[HHM]

You are just full of questions, which is understandable of course.

The answer is, it depends.

If you are current on the payments, and continue to make the payments, then you are not in default on the two car notes, so the finance company cannot repo the cars.

The issue with two cars is whether the BK trustee can take one, and that will depend on your states exemption law. Generally, you are only allowed to exempt one car (and if married, each spouse usually gets an exemption, thereby getting the ability to exempt two cars).

[Sandra]

thanks finally an answer i can understand, but i thought once i file i shouldnt make the payments and i dont want my husband and i to lose the cars, we live in tx and between us have ALOT OF CC DEBT AND SECURED AND UNSECURED LOANS we would like to get erased i had an injury which left me disabled and unable to make any significate money i have no idea if this is the way but it is getting harder and harder to pay the bills and i dont want to lose what we do have so any help is appreciated `

[HHM]

On secured loans, you can continue to make the payments while in Bankruptcy (assuming you intend to keep the property), and if you want to keep the property, you must continue to make the regular monthly payments.

[Sandra]

So If There Is A Lien, Ie A Car Note And U Dont Make Payments The Dealer Can Repo This Car? Is This What U R Saying? Its My Understanding Once A Creditor Such As A Dealer Is Given The Papers That Someone Is Filing Bk That The Dealer Cant Do Anything Even If That Person Is Behind On Payments And Completely Stops Making Payments Also What Does It Mean When A Dealer Is Sent Papers Saying A Person Is Granted A Discharge Under Chapter 7? Does That Person Have To Pay? Thanks Sandra

[HHM]

So If There Is A Lien, Ie A Car Note And U Dont Make Payments The Dealer Can Repo This Car? Is This What U R Saying? Its My Understanding Once A Creditor Such As A Dealer Is Given The Papers That Someone Is Filing Bk That The Dealer Cant Do Anything Even If That Person Is Behind On Payments And Completely Stops Making Payments Also What Does It Mean When A Dealer Is Sent Papers Saying A Person Is Granted A Discharge Under Chapter 7? Does That Person Have To Pay? Thanks Sandra

Well, who ever you heard that from is completly wrong. You basically have 3 choices in a BK when it comes to Car loans

1. File a chapter 7 (assuming you otherwise qualify for a chap 7), give the car back to the dealer and you are not liable for any more payments or any deficiency balance

2. File a chapter 7 or 13, keep making the payments (even during the BK), and keep making them after the BK, and you can keep the car. (assuming any equity in the car is within your state's exemption.

3. File a chapter 13, and as part of your chapter 13 payment plan, you pay back to the dealer what the car is worth at the time of you filing BK. This option is called a cram down, and is beneficial if you owe substantially more on the car then the car is worth.

If you are behind on payments when you file BK, what happens depends on how far behind your are, if its 1 to 3 months, your finance company may allow a reaffirmation agreement where you pay more per month to make up the missed payments.

If you stop paying the car during BK, the dealer can repo the car after they get an order from the BK court, which the BK court will freely grant because you missed you payments.

In short, when it comes to secured notes, there is no free lunch in BK.