When you rely on your vehicle for employment, family, and personal reasons, it’s hard to imagine the extensive consequences if you lose it in bankruptcy. To avoid or mitigate the harsh consequences, you need to know how to file bankruptcy and keep your car in Michigan.
To file bankruptcy and keep your car in Michigan, you must use exemptions to protect its equity. In Chapter 7, stay within exemption limits or reaffirm the loan. In Chapter 13, include payments in a repayment plan. Choosing the right bankruptcy type ensures you can keep your vehicle.
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FAQs About Filing Bankruptcy and Keeping Your Car in Michigan
Can I declare bankruptcy and keep my car?
Yes, you can file for bankruptcy and keep your car in Michigan under certain conditions. If you file for Chapter 7, your car’s equity must fall within the Michigan or federal motor vehicle exemption limits, and you must stay current on payments if you have a loan. In Chapter 13, you can include missed car payments in a repayment plan to prevent repossession. Reaffirming the loan or redeeming the vehicle may also allow you to keep it.
What assets are exempt from Chapter 7 in Michigan?
In a Michigan Chapter 7 bankruptcy, certain assets are protected from liquidation under exemption laws. Exempt assets include up to $4,250 in equity for a vehicle ($9,525 for elderly or disabled individuals), homestead equity up to $46,125, personal property, tools of the trade, retirement accounts, and some wages. Federal exemptions are also an option, offering different limits. Choosing the right exemption set is crucial to protecting property, including your car, from being sold by the bankruptcy trustee.
What are the risks of keeping my car during bankruptcy?
The biggest risk of keeping a car during bankruptcy is repossession if payments are not current. In Chapter 7, if the car's equity exceeds exemption limits or the filer cannot afford loan payments, the lender or trustee may take the vehicle. In Chapter 13, failing to make plan payments can result in repossession. Additionally, reaffirming a car loan in Chapter 7 means personal liability for the debt remains, even if financial struggles continue.
Is it worth it to fight to keep my car in bankruptcy?
Yes, keeping a car in bankruptcy is often worth the effort if it is necessary for work, family obligations, or daily transportation. If the car loan is affordable and its equity falls within exemption limits, retaining the vehicle can provide long-term stability. However, if payments are unaffordable, surrendering the car and discharging the debt may be a better financial decision. Evaluating your overall debt situation and repayment ability is essential before deciding.