Many clients turn to chapter 7 bankruptcy because they are behind on car payments. Fortunately, chapter 7 bankruptcy gives clients the power to eliminate car loans and simply walk away from their vehicle.
Outside of bankruptcy a lender will eventually repossess your car if you fall behind on payments. After they repossess your car they will add fees related to the repossession and other costs to the outstanding balance. If you do not pay this amount they will eventually sue you for the “deficiency balance” and later pursue wage garnishment or bank levy.
By filing bankruptcy after repossession you can discharge the “deficiency balance” and all debt related to the repossession. However, you can also preempt this entire process by filing bankruptcy before your car is repossessed.
In chapter 7 bankruptcy you can surrender your vehicle and discharge the car loan. When surrendering your vehicle you will turn over your car to the lender. Once your car loan is discharged in bankruptcy you will no longer have the legal responsibility for repaying the car loan. In brief, by surrendering your car in bankruptcy you are simply “walking away” from the car and any associated debt.
If you are unsure whether you should surrender, reaffirm or redeem your car in bankruptcy you should speak with a bankruptcy lawyer. Each of these options have their own advantages and disadvantages, and each entails a different process. A bankruptcy lawyer can explain the process and help you make a decision that makes sense for your long-term financial goals. Many times it is advisable to surrender a car in bankruptcy, but if your car is underwater but in good working condition redemption may be beneficial. To get help making this decision and learn more about surrendering your vehicle contact our bankruptcy lawyer by calling the phone number at the top of the page.