One of the major concern people have while filing for bankruptcy is whether they will be able to protect their vehicle or not. According to Los Angeles based bankruptcy law firm https://recoverylawgroup.com/ lawyers, it depends on various factors. The primary factor which helps decide whether you can keep your vehicle during bankruptcy is the equity in the vehicle. Another point of consideration is whether the equity is exempted using either federal or state exemption. To save your vehicle you could either use the vehicle exemptions or you could use other exemptions to protect more equity.
In case you are leasing your car or taking a loan to purchase the vehicle, and you owe the lender full value of the car or more than what the vehicle is worth, then you can hold on to it by reaffirming the lease or loan. However, if you don’t wish to keep your vehicle (not reliable, costs more than its worth, etc.) you might prefer to let it go in the process to buy another. the million-dollar question is whether to buy one before filing for bankruptcy or after your bankruptcy filing. Though you can purchase a new vehicle before the bankruptcy filing, you must have a legitimate reason for buying a new vehicle close to your bankruptcy filing.
Unless you wish the bankruptcy trustee to raise a red flag regarding your purchase, you need to be prepared to answer the following questions:
- Why you purchased the car? Was the previous vehicle unreliable or the new vehicle was purchased to hide assets?
- In case you are filing for Chapter 7 bankruptcy, were you able to qualify for Chapter 7 without the new car loan or was the loan taken in order to help you qualify for the same?
- Can you exempt the entire value of the new vehicle if you are buying it with cash?
Though sounding simple, these questions can be tricky and discussing these with a bankruptcy attorney before proceeding with either filing for bankruptcy or purchasing a new vehicle is an excellent idea. Discussing the pros and cons of the decision is very important, especially if you are contemplating bankruptcy. you can discuss your case with experienced bankruptcy attorneys at 888-297-6023.