Chapter 7 car exemptions
Aurora Illinois Bankruptcy Lawyers & Attorneys
Jesse Barrientes: Sure. I want to talk about Chapter 13 more in-depth a little bit later as we go along here. What about my car? A lot of people feel that, "Hey listen. I have this car and I really need to keep it because that's how I get to work. That's how I make my living. Am I going to be able to keep my car as well?"
David Siegel: I can't see you getting on to 151 Sheridan Road and taking the bus. I just can't picture that.
Jesse Barrientes: Can't see that huh?
David Siegel: No, can't see that. Yes, you will be able to keep your car. If it's a leased vehicle, you'll have to continue to make your leased auto payment. If it's a financed vehicle, you're going to have to catch up and make your regular payment on the car. Most people do not have a lot of equity in their car. In other words they owe what it's worth.
Jesse Barrientes: Or usually they're upside down on it.
David Siegel: Often upside down. They just have to keep making their payments, and they're going to be able to keep their vehicle while they're eliminating their other debt.
Jesse Barrientes: Is the same true with the car as it is with the house? For example, if I'm behind on my payment, that's something I'm going to have to make up?
David Siegel: You are going to have to catch up. Most auto lenders do not want you to be paying ___. They want you to be current, otherwise they're going to repossess the car and sell it at auction.
Jesse Barrientes: Let me ask you about that. Let's say again, I'm a couple months behind on my car here, $700.00, and I really want to keep it, and we file Chapter 7 because they've called me and said that they're going to send a couple folks out here to repossess the car. We file the Chapter 7. Can they take my car still?
David Siegel: A couple things here. First of all, once you've filed the bankruptcy with an Aurora bankruptcy attorney, an automatic stay is created. That's a big roadblock that goes up prohibiting creditors from contacting you or taking property without court approval. The auto lender is going to want you to get current. They're going to afford you an opportunity to get current because they really don’t want the vehicle back. They want your continued payments. If they've determined that you can't get current, then they're going to repossess the vehicle, but it's probably not going to happen right away. They're going to offer you some type of arrangement to see if you can get current.
Jesse Barrientes: But they'll have to go through the bankruptcy court in order to lift the stay.
David Siegel: Right. They can go to the bankruptcy court and ask for permission to proceed against your collateral because you're not making payments, but they're also going to offer you a reaffirmation agreement which is an agreement that allows you to keep the vehicle throughout the bankruptcy and beyond, putting you back on the hook for those payments, provided you can make timely payments and provided you have the vehicle insured.
Jesse Barrientes: Is it going to be the same payments, or am I going to save any money by doing this?
David Siegel: Ninety-five percent of the time it's going to be the same contract payments that you had before you filed. In some cases, lenders will negotiate. Older vehicles, less value – they really don't want those vehicles back. They might be willing to cut the balance, but on a newer vehicle, you're most likely going to pay what you were paying before you filed the bankruptcy on the car.
Jesse Barrientes: Let's say for example in the rare case where my car is paid off, or it's just about paid off, and I have maybe one more payment left, and oh, I don't know, let's say maybe it's worth Blue Book – you look at Kelly's Blue Book and you've got three different kinds of values. You've got your—
David Siegel: Pick the middle.
Jesse Barrientes: Private party value, trade-in, and such. Let's say it's $3,500.00. Now I mean, I have some equity in the value. Is the trustee going to take and sell my car to liquidate that money to pay the creditors?
David Siegel: Most likely not. As I told you about a certain dollar amount that the State of Illinois allows you to have equity in a house. You're allowed $2,400.00 worth of equity in a vehicle, but in addition to that – this is important – each individual who files is afforded a $4,000.00 wild card exemption that they could sprinkle over any property. You can use the $2,400.00 plus some of the $4,000.00 wild card and completely protect your car while getting out of debt.
Jesse Barrientes: Is that $2,400.00 per vehicle?
David Siegel: It's $2,400.00 for one vehicle.
Jesse Barrientes: Just one. So if I had two vehicles, I'm out of luck if it goes beyond those exemptions?
David Siegel: Right. In that case you would use the $4,000.00 catch-all on the unprotected vehicle.
Back to Aurora Illinois Bankruptcy Lawyers & Attorneys
See Also:
Chapter 7
Misconceptions about Chapter 7
Life after Chapter 7 bankruptcy
Privacy is protected in bankruptcy
Household income qualifications
Converting Chapter 13 to Chapter 7
Converting Chapter 7 to Chapter 13
Chapter 13
Using Chapter 13 to save a home
Choosing Chapter 13 versus Chapter 7
Debt consolidation & late fees
Administrative fees & the bankruptcy trustee
Chapter 13 payment plan dismissal
