Often, when finances become strained to the point of no return, bankruptcy is a viable option to help relieve stress and clear up a mountain of debt. That being said, bankruptcy requires careful consideration and asking some important questions is critical. One such question is ‘will I lose my car in bankruptcy?’ This week, we attempt to answer that question for you.
We will start by saying that this is not a yes or no answer. Whether or not you can keep your car largely depends on two factors – whether you own it outright (have clear title) and how much it is worth.
Do you have clear title? Clear title means that there are no liens registered against your car. This often occurs when you use your vehicle as security for a loan. If you have a lien, you will most likely be able to keep the car, as long as you continue to make the required payments. However, before you settle on this route, it is best to determine the fair market value of the car. If you owe far more than what the car is worth, it may not make sense to keep the car. For example, if you used the car as security for a loan of $10,000, but the car is only worth $2,000, it may be a smarter idea to give up the car rather than continuing to pay the loan (which will then be included in your bankruptcy). In this case, a bankruptcy is a chance to return the car and start fresh.
If you have clear title, meaning you own the car outright, you will be able to keep it if its value is within the exemption limits prescribed by your province. In Ontario, for example, if your car is worth less than $6,600, it will not be seized by the trustee, meaning you can keep it. If the appraised value of the car is greater than $6,600 however, you can still keep the car, but only if you pay the non-exempt portion. Often trustees can negotiate a payment plan so that this amount can be paid over the course of the bankruptcy.
If this is old news for you, and you’re currently in bankruptcy and without a car, a new car loan and new vehicle is a great way to restructure payments and rebuild credit. Since many of us can’t do without a car, it might be time to consider speaking to a financial consultant about your options for obtaining financing for a car loan, even if you are an undischarged bankrupt.
For many, the question of ‘will I lose my car in bankruptcy’ is an important one, one that often requires an answer before settling on a decision. Since your car can represent a considerable asset, it is important to explore all avenues.
At Prudent Financial, we can help you better understand those financial options, both before and following bankruptcy.
Want more information? Call us today at 1-888-852-7647.