Expert: Mark J. Markus- California Bankruptcy Attorney - 7/25/2010

Question
If I file Chapter 7 bankruptcy can I keep my car that is financed? We have 2 cars that are financed. I have been laid off for 16 months and if I don't get a job or an extension on my unemployment we are going to have to file bankruptcy because we cannot make the payments with 1 income. I have been paying almost $500 a month for 3 years on my car, the low book on it is about $12,000, I owe $16,000 and have already paid almost $17,000 for it, so based on that is there any way I would get to keep it because without the interest I have pretty much already paid the value for it. We will have to let the other one go, but it is junk anyway. I have a child that I will need to get to school, get groceries, etc. so I will need a car. Thank you.

Answer
I'm not completely sure what you're asking.  Are you asking if you can keep the car without making any more payments on it?  If so, the answer is a definite "no".  The vehicle creditor is secured and, as such, they have a security interest in their collateral.  If you do not make the required contractual payments, they can repossess the vehicle.   

You do have certain other options in Chapter 7 which includes being able to redeem the vehicle by paying a lump sum for the fair market value (usually private party value) of the vehicle.  If your vehicle creditor is Ford or Chrysler, you will otherwise have to do a reaffirmation agreement, which obligates you to pay the balance due and, if you fail to do so, you will be liable for any deficiency amount if the vehicle is later repossessed.  If your vehicle creditor is someone other than Ford or Chrysler, you may be able to just retain the vehicle as long as you stay current with your monthly payments, without taking any further action.

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