If you file for bankruptcy in Colorado, there is a chance that you will be able to retain ownership of your vehicle. This may be true regardless of the type of protection that you seek from creditors. However, if a creditor has a lien on your car, you must remain current on your loan payments to avoid a potential repossession.
Keeping your vehicle after filing for Chapter 7 protection
In a Chapter 7 proceeding, nonexempt assets are liquidated by the trustee. The money raised from the sale of your assets will be used to pay your existing creditors. In most cases, a portion of the equity in your vehicle is considered exempt. If the amount of equity in your car exceeds the exemption limit, the trustee in your case may choose to sell the car.
In such a scenario, the equity would be split between yourself and your creditors. If the amount of equity in your vehicle is less than the exemption limit, you will usually retain that asset. An attorney who is familiar with bankruptcy law may be able to help you better understand how the law treats a vehicle in a liquidation proceeding.
Keeping your car after filing for Chapter 13 bankruptcy
Typically, you’re allowed to retain ownership of most tangible assets after filing for Chapter 13 bankruptcy. As with a Chapter 7 proceeding, this assumes that you are current on any payment associated with those items. Therefore, you risk losing ownership of your vehicle during a Chapter 13 proceeding by missing a loan payment.
You don’t have to keep possession of your car
It’s important to note that you are allowed to voluntarily surrender a vehicle at any point during a bankruptcy proceeding. However, it is worth noting that doing so may have a significant impact on your credit score.
If you are considering bankruptcy, it is a good idea to hire an attorney to help with your case. He or she may explain more about how filing for Chapter 7 or 13 could impact your ability to retain important property.
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