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Washington Chapter 7 Bankruptcy Attorneys

Your Car in Bankruptcy

Many of our clients ask us what will happen to their vehicle or car in a Washington State Chapter 7 bankruptcy.  Will it be repossessed?  Will they have to surrender it?  We have provided some basic information below about cars and Chapter 7 bankruptcy. 

If you have additional questions about what will happen to your car in a Chapter 7 bankruptcy, we invite you to call our offices to learn more about your options.  You can speak with one of our Washington Chapter 7 bankruptcy lawyers who will review your finances and the specific circumstances involved in your vehicle and the explain your legal rights.

In a Washington Chapter 7 bankruptcy, which is also sometimes referred to as a “liquidation bankruptcy”, some of your property could be taken to pay part of your debt. Most people who are contemplating filing a Chapter 7 bankruptcy are worried that their car will be taken from them.

That is usually not the case, and our Washington State Chapter 7 bankruptcy attorneys will help you explore all of your options to keep your car, if that is what you want to do.  It would be hard to get a fresh financial start through a Chapter 7 bankruptcy if you lost your ability to go to work.  In Washington most automobiles can be protected in a Chapter 7 bankruptcy

If you are still making payments on a car, your main worry probably isn’t whether the car can be taken because the amount of the loan may be more than or close to the value of the car. Your main concern is whether you can continue to make the payments.

If you can afford it, the car finance company will want you to sign a “reaffirmation agreement”. This agreement takes the car loan outside the bankruptcy – so, if you sign it and then can’t make the payments, you may be stuck with a big debt after your car is repossessed. You need to be careful when deciding whether to sign this agreement.

Another way of dealing with a car debt in a Chapter 7 bankruptcy is to “redeem” the car. Bankruptcy laws let you pay off a car loan by paying the value of the car. It is possible to arrange a loan to redeem the car – so you would have a new loan with a lower balance after the court approves it. In some cases it makes sense to pay off a car with cash but many people in Chapter 7 bankruptcy must borrow the money to redeem a car.

A third option is to surrender a car. If the car payment is more than you can afford, you can let the car finance company take the car back and just walk away from the loan. However, in most circumstances you can keep a car in a Chapter 7 case – and getting rid of a lot of debt will help your cash flow, making a previously unaffordable car more affordable.