If I File for NJ Bankruptcy, Will I Lose My Car?


Just the idea of filing for bankruptcy in NJ can be truly exhausting and stressful. Add in all the questions that come up along the way, and you have a recipe for massive confusion. Luckily, you have already acknowledged that bankruptcy may be a good way for you to get your financial life back in order. That is the first step toward making better decisions that will turn your situation around.

Many people avoid filing for bankruptcy for far too long because of fears, misinformation or misunderstandings about what actually happens when bankruptcy is filed. The best way to make sure you have accurate information about your NJ bankruptcy petition is to work closely with an experienced bankruptcy attorney.

Your NJ bankruptcy attorney will be able to look at your unique financial details and explain to you exactly what may or may not happen should you decide to file for bankruptcy.

Some of the most common questions asked by clients who are contemplating a bankruptcy case include: Will I lose my house? Will I be able to buy a new house? What will happen to my retirement benefits? Will I be able to accept an inheritance? How much of my Social Security check will go to paying off my debts?

Today, we will try to answer the question pretty much everyone wants to know:

Will I lose my car?

Understandably, fear of losing your mode of transportation is quite high for those people who are already struggling to make ends meet. The lack of a proper vehicle may inhibit them from getting to their job every day, which may be the only thing keeping them afloat at this point.

The good news is, that if you own your car outright, you will be able to continue driving to and from work without a problem, as long as it does not have a value above your state’s vehicle exemption amount.

If you are still making payments on your vehicle, it becomes a little bit more confusing. While you are negotiating the terms of your bankruptcy with the help of your NJ attorney, one thing you will have to decide is whether or not you want to keep making payments on your car, or if you want to surrender it.

That’s right, it’s up to you. However, if your vehicle monthly payment is quite high, it would probably be most beneficial to surrender your car in the bankruptcy. In this case, you will not owe any further liability on your vehicle loan after your bankruptcy case is completed, and you can attempt to buy a much less expensive car that falls within your new budget.

If you would like to continue making payments on your vehicle after you file for bankruptcy, you have several options. Sometimes, lenders may simply continue to accept your monthly payment without a reaffirmation agreement (making up a new contract). Some lenders will require that you enter into a new contract with similar terms, stating that you agree to be responsible for the debt even after your bankruptcy case ends.

If at all possible, it is best to keep making your car payment without a reaffirmation agreement because if you do end up defaulting on your payments, you won’t owe any deficiency amount, because it will have been removed from your responsibility in your bankruptcy case.

If you do agree to reaffirm your car loan, your lender can repossess your vehicle if you default on payments, and you will be responsible for any deficiency, since you agreed in writing to be responsible for the debt after your bankruptcy case.


Image credit: Michael Evans


5 Responses to If I File for NJ Bankruptcy, Will I Lose My Car?

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