What will Happen to Your Car in an Arizona Bankruptcy?

car in an arizona bankruptcy

What will Happen to Your Car in an Arizona Bankruptcy?

One of the biggest concerns that people have when filing for bankruptcy is whether theya��ll get to keep important personal belongings. The car is one of those. Ita��s certainly important to understand all aspects of an Arizona bankruptcy before filing. You will be entitled to some protections and exemptions. A personal vehicle belongs to this category. Let’s see the status of a car in an Arizona bankruptcy.

The Scope of the Motor Vehicle Exemption

When filing for a Chapter 7 bankruptcy, you will be entitled to certain exemptions. These are the assets and the types of property that creditors cannot take away from you.

Arizona debtors can exempt equity in a motor vehicle totaling up to 6,000 dollars. Individuals that have a diagnosed physical disability are entitled to an exemption of up to 12,000 dollars.

How do you make the calculation? Leta��s say you own a car worth 15,000 dollars and you have a 10,000-dollar loan. In this case, your vehicle equity is 5,000 dollars and it falls under the exemption. When you file for bankruptcy, you get to keep the car and it cannot be taken away by a creditor.

In Arizona, married couples are also entitled to doubling the motor vehicle exemption. This is possible if they file joint bankruptcy.

Because of inflation and other economic factors, the sum that is exempt will be updated periodically. You may want to check an official source of information before filing for bankruptcy to make sure that your motor vehicle is protected.

Chapter 13 Bankruptcy and Your Car in an Arizona Bankruptcy

Most often, your car will be protected whenever you file a Chapter 7 bankruptcy. What will happen in the case of a Chapter 13 bankruptcy, however?

A Chapter 13 bankruptcy is different because it involves the establishment of a personalized debt payment plan. Creditors, however, are prohibited from attempting to collect immediately after a person files Chapter 13 bankruptcy in Arizona.

The automatic stay means that a car loan lender, for example, cannot repossess the vehicle due to your inability to make payments. Usually, you will get to keep your automobile and the car loan payments will be included in the Chapter 13 plan. If you owe a very big amount, you could also reduce the debt sum by including it in the Chapter 13 payment plan.

If your car has already been repossessed, you will need to contact an experienced bankruptcy attorney immediately. It may still be possible to get back a vehicle that was repossessed before you filed for bankruptcy.

Your Options

car in an arizona bankruptcyThe conclusion here is that you have an option. If you want to, you get to keep your vehicle both under a Chapter 7 and a Chapter 13 bankruptcy. The only instance in which this rule isna��t valid would be a car thata��s worth a lot more than the state exemption. If your car equity is worth much more than 6,000 dollars, chances are that the trustee will order the sale of the car.

Depending on your preferences, you can also willfully choose to surrender an automobile back to the bank (in the case of an older car that costs a lot in terms of maintenance, for example).

A final option is redeeming the car.

This tool is available under the Arizona Chapter 7 bankruptcy regulation. This tool allows debtors to pay the value of the car rather than whata��s owed. If you owe 15,000 dollars but your car is worth solely 5,000 dollars, you will have to pay 10,000 dollars if you choose to redeem the vehicle.

While this option is a rather lucrative one, you should know the catch (yes, there is one!). You have to provide the entire sum in one payment and immediately. If youa��re filing bankruptcy, youa��re probably missing the sum that will be required to redeem the automobile.