Your vehicle’s equity value may determine whether you may keep it after filing for bankruptcy. Minnesota’s statutes protect cars with an equity value of less than $5,000.
As described by Experian.com, you could calculate your car’s equity. Start by finding its current market value. Then subtract the balance of your loan. If the market value of your car exceeds your loan’s balance, you have positive equity in your vehicle. With a positive amount below $5,000, you may keep your car. A negative equity value also allows you to hang on to your vehicle.
Staying current on auto loan payments
The type of bankruptcy you file could affect your car loan. With a Chapter 7 bankruptcy, you may need to show the court that your loan account has a “current” status to keep your vehicle.
Bankrate.com notes that your lender may repossess your car if you fall behind on payments. You may, however, continue sending in payments during bankruptcy to keep your vehicle if it does not exceed the exemption value. You may also renegotiate a new payment arrangement with your lender. Surrendering your car may provide another option if you cannot afford the payments.
Reaffirming or reducing a loan balance
With a Chapter 13 bankruptcy, a U.S. trustee will work with you on a payment plan that addresses your debts. A court-approved arrangement typically lasts between three and five years and repays some of your creditors.
You may keep your car if you could afford the payments with your plan. In some cases, a lender may reduce the amount that a borrower owes if the loan is older than 910 days.
Individuals need their cars to get to work, and Minnesota’s bankruptcy exemptions allow petitioners to protect their vehicles. By staying current on your loan, you may keep your car and also rebuild your credit through on-time payments.