Wednesday, March 4, 2009
PERSONAL BANKRUPTCY AND YOUR CAR
There are certain assets which are exempted as per federal law and state law of bankruptcy. Exemptions are generally applicable on the basis of equity of the property a person is having. In case of a car the equity of it must be less than the exemption otherwise if the equity is more than the exemption then the car will be sold of to pay the debts of the creditor.
If a person in having a car loan then filing Chapter 7 bankruptcy has three options to offer to that person.
Reaffirm
In this case a deed is signed in between the debtor and the car creditor specifying the continuation of payments to the creditor and the creditor guarantees not to acquire it till the debtor continues the payment.
Surrender
This is a straight and simple method. Here the debtor will surrender the vehicle to the creditor as he is not in a position to pat the monthly dues.
Redeem
Here a person, whose car is taken away by the creditor, can have it back after he pay the creditor the fair market value of the car. According to the bankruptcy code of 2005 the debtor has to pay the replacement retail price of the car.
If the car is leased the debtor either can continue with monthly lease payments or can surrender the car. If surrendered the lease obligation will be erased.
In case of Chapter 13 the repossession is stopped but the debtor has to make payments depending on the time of purchase. If the car is purchased after 910 days of filing bankruptcy then the payment is to made according to the prevailing market price. But if the car is purchased within 910 days of filing then the entire loan is required to pay off. But the interest rate will be reduced to a great extent.
Filing bankruptcy affects the credit report very badly. Some companies that deal with car insurance use credit report to check the creditworthiness of the borrower. They might offer you insurance policies but the interest rate will not be attractive.
If a person in having a car loan then filing Chapter 7 bankruptcy has three options to offer to that person.
Reaffirm
In this case a deed is signed in between the debtor and the car creditor specifying the continuation of payments to the creditor and the creditor guarantees not to acquire it till the debtor continues the payment.
Surrender
This is a straight and simple method. Here the debtor will surrender the vehicle to the creditor as he is not in a position to pat the monthly dues.
Redeem
Here a person, whose car is taken away by the creditor, can have it back after he pay the creditor the fair market value of the car. According to the bankruptcy code of 2005 the debtor has to pay the replacement retail price of the car.
If the car is leased the debtor either can continue with monthly lease payments or can surrender the car. If surrendered the lease obligation will be erased.
In case of Chapter 13 the repossession is stopped but the debtor has to make payments depending on the time of purchase. If the car is purchased after 910 days of filing bankruptcy then the payment is to made according to the prevailing market price. But if the car is purchased within 910 days of filing then the entire loan is required to pay off. But the interest rate will be reduced to a great extent.
Filing bankruptcy affects the credit report very badly. Some companies that deal with car insurance use credit report to check the creditworthiness of the borrower. They might offer you insurance policies but the interest rate will not be attractive.
Subscribe to:
Post Comments (Atom)
0 comments:
Post a Comment