Can a car loan be discharged in Chapter 7 bankruptcy?

Can a car loan be discharged in Chapter 7 bankruptcy?

If you don’t want to keep your financed car in Chapter 7 bankruptcy, you can surrender it and discharge the car loan. Updated By Cara O’Neill , Attorney If you have a car loan or a car lease when you file Chapter 7 bankruptcy, you must choose whether to keep the car and continue to pay for it or surrender it and discharge (wipe out) the debt.

What happens to your car when you file bankruptcy?

Once filed, the automatic stay stops most creditors from contacting you. While in place, those creditors cannot call you, send you bills or letters, or take other action to collect the debt. If you have a car loan when you file for bankruptcy, the creditor cannot repossess the car.

What does it mean to be discharged from bankruptcy?

A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts.

Can a hardship discharge be used in Chapter 7 bankruptcy?

Such a discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor’s control. The scope of a chapter 13 “hardship discharge” is similar to that in a chapter 7 case with regard to the types of debts that are excepted from the discharge.

What happens when you surrender a car in bankruptcy?

Process for Surrendering Your Car. Once the court lifts the stay, the creditor can repossess the vehicle, or you can voluntarily turn the vehicle into the creditor at an agreed location. The creditor will sell the car at auction but, if it doesn’t sell for the amount you owe, you won’t be responsible for the balance.

Can a secured debt be wiped out in Chapter 7 bankruptcy?

Most people have a loan that’s secured by property, such as a mortgage or a car loan. These debts—called secured debts—can be tricky in Chapter 7 bankruptcy. Although the secured debt itself can be wiped out (discharged)—and often is—the creditor will still have a right to take the property back if you fail to pay (default on) the payments.

Can a creditor repossess your car if you file bankruptcy?

If you have a car loan when you file for bankruptcy, the creditor cannot repossess the car. On average, you can expect the Chapter 7 process to take three to four months. Not everyone is entitled to a Chapter 7 discharge. Your household income can’t exceed the state median income for a family of the same size.

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