Motor vehicle exemption act and bankruptcy

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Motor vehicle exemption act and bankruptcy

Cars, trucks, automobiles, etc., attract a lot of tension during bankruptcy. Travelling can be an expensive and painful affair without a car in most cities in the United States. No individual wants to let go of his/her car for whatever reason there might be. Bankruptcy can be one of the situations that would require a compromise as an automobile loan is considered as a secured loan and is released in very rare circumstances. It is much easier to protect your automobile assets if you are filing for bankruptcy via Chapter 13 versus Chapter 7. The key distinction between Chapter 7 and Chapter 13 is the provision they allow for in order to settle the debts. Chapter 7 liquidates all your non-exempt assets in order to payoff secured and other priority debts with its proceeds. Your automobile might well fall under non-exempt asset. To know more about exempt and non-exempt assets, log on to Recovery Law Group.

On the other hand, Chapter 13 emphasizes on creating a future repayment plan which means your current assets are not under any kind of danger. This plan, however, lasts for 36-60 months and a debtor ends up clearing most of his/her debt with the disposable income realized/calculated by the bankruptcy court.

How do you protect your vehicle when applying for bankruptcy under Chapter 7?

Under normal circumstances, the vehicle is part of a secured loan and has to be prioritized across other loans during liquidation. Also, cars, vans, trucks, and motorcycles do not form a part of exempt assets hence, the bankruptcy trustee has full authority to liquidate the asset and pay off the debts. The motor vehicle exemptions act can help protect your vehicle in these circumstances. If the entire equity of your vehicle has been covered under the car exemption, the bankruptcy trustee might not be able to liquidate your car. If the car equity is partially covered under car exemption, the bankruptcy trustee can still be able to consider it as a non-exempt asset for liquidation.

Apart from being a game changer in the Chapter 7 bankruptcy California code, the motor vehicle exemptions have a significant role to play in Chapter 13 code also. If your vehicle is not protected under the exemption, it will add up to the tally of nonexempt assets, which ultimately decides the amount due to unsecured creditors. This means you will end up paying out more unsecured debt if your tally of nonexempt assets is higher. Getting your vehicle covered with motor vehicle exemption act can be a good move considering these aspects.

Federal and State laws to be used for safeguarding your vehicle

There are different circumstances, situations when Federal law is beneficial and can prevail over state laws. Historically, people filing for bankruptcy without an attorney or qualified professional help have failed to retain their cars, trucks, vans and other vehicles. The bankruptcy trustee isn’t the most lenient person when it comes to the nonexempt assets. Sometimes, it can just be beneficial to let go of your car and sometimes, there are ways to protect your car by making different arrangements before filing bankruptcy and after. Every situation case is different and needs a thorough/professional analysis to determine a beneficial situation for the bankruptcy filer. Seek the best professional help right on your phone at +1 888-297-6203.