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Got an Expensive Car or Bike You No Longer Want to Pay For?

Do you have a car or motorcycle that you bought a while back that you are not too excited about anymore? Are you behind on the huge payments and don’t know what to do? Bankruptcy can relieve you of the vehicle without any liability to follow. Here’s how it works.

If you file a Chapter 7 bankruptcy and surrender an asset in the bankruptcy, you will be discharged of any left-over liabilities or debts as a result of a repossession of the vehicle. Surrendering a car or motorcycle or any other secured asset in a bankruptcy will mostly lead to a repossession of the vehicle by the finance company. After the repossession happens, the finance company will usually put the vehicle up for auction. When the vehicle gets sold at auction, the finance company receives the proceeds from the auction. The difference between the funds received from the auction and the amount owed on the vehicle is what is left for you to pay IF you don’t use a bankruptcy. If you use a Chapter 7 bankruptcy and surrender the vehicle within the bankruptcy, the left-over liability will be completely discharged in the bankruptcy along with any other unsecured debts that you may have. Without the bankruptcy, a finance company will attempt to collect the deficiency of what was not paid off on their vehicle loan that was issued to you.

Let’s take a look at an example. Our imaginary client named Michael owes $10,000 on an automobile which is worth $5,000. He is no longer interested in keeping the vehicle. He needs to file a bankruptcy because he cannot afford to keep the car and pay the car payments any longer. He is current on payments, but still is not interested in keeping it. You do not have to be late on payments in order to file bankruptcy and get debt discharged. Michael decides he wants to surrender the car within the bankruptcy. Michael schedules a time to drop off the car at the dealer and they accept it and sell it at auction. The car sells at auction for $3000. Since Michael owes $10,000 and the car sold for $3000, the left-over liability is $7000. Michael doesn’t have $7000 to pay for the deficiency, but he knows he will not be collected on for this debt because he surrendered the automobile in the bankruptcy and has discharged any deficiency amount result. After the bankruptcy, Michael has no unsecured debt left-over and he is able to purchase another car.

As you can see, the process is fairly simple. Don’t feel as though you are completely stuck with secured assets like cars or motorcycles which you don’t want to keep. You can include them into your bankruptcy filing to eliminate any debts left over from surrendering the vehicle.

 

 

 

Bankruptcy Law Professionals is a law firm based in Southern California.  Our offices in Orange County and Riverside are for our local attorneys to help you in free consultations.  Please contact us at 855 257-7671 to schedule an appointment for a free consultation.

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