What Happens to Your Car During Bankruptcy?

Bankruptcy is a difficult, emotional process that will burden you with stress and worry. But, sadly, it's often one of the best choices for those facing serious financial hardships. You'll probably have a ton of questions if you're thinking about filing for bankruptcy, one of which is what happens to your car. Transportation is a must for most Canadians, and understanding how a bankruptcy affects your vehicle is important. There are a few variables that will change just what happens to your car during bankruptcy.

Two things will be looked at in relation to your vehicle when you file for bankruptcy.

• • The first is just how much the value of your car is. You'll have to get an independent appraisal to turn in to the attorney or trustee handling your bankruptcy.
• • The second issue you'll need to address is whether or not you have any liens against your car or if you own clear title for the car. If you have a lien against the car, your creditor will turn in their claim to your trustee. The priority claim is the one that will be dealt with first.

If your vehicle is valued at or above what you owe you may have the option to continue making payments. If it is valued lower than the amount that you owe, you may be able to negotiate with the creditor to pay them the fair market value of the vehicle. If not, they do have the right to repossess the car. They can also do so if you decide not to make payments, regardless of the total amount owed. If you owe more than the fair market value for your car, it's unlikely that your creditor will accept less.

In the event that your car is repossessed but is worth less than you owe, the remainder of your balance will be structured into your overall bankruptcy proceeding. However, if you have clear title to the car you will still be required to pay the trustee the market value or surrender the car to them to help pay off your loans. Cars worth less than 5,650 dollars which have no liens are exempt from this and you will be allowed to keep them. You may be able to pay the difference in value, such as paying 1,000 dollars if your car is worth 6,650. In short, the odds are that your car may be lost in a bankruptcy proceeding. But in some cases, it's simply the only way. 

For more valuable information, visit www.prudentvaluecars.com