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Can you keep your car when you file Chapter 7?
Frequently, clients want to know if they can keep their car when they file a bankruptcy. Under chapter 13, generally, a debtor can hold on to all their assets. Retaining assets is only an issue under Chapter 7 Bankruptcy.
As stated previously, the law provides a list of “exemptions” that allows a debtor to hold on to various assets when he files. In January 2011, the law changed to increase the vehicle exemption from $2500 to $4,000. This means that if your car is worth $4,000 or less, your car is protected from creditors. If your car is worth $20,000, but you have a note for $16,000 on the car, you can keep your car because your equity is only $4,000.
Now, if you owe more than the car is worth, there is another attractive option. When you file Chapter 7 Bankruptcy, you may apply for the refinance of your car under the 722 program. If you have enough income to cover the loan payments, you can get a loan modification for the book value of the car and the bank will reduce the total amount you owe and dramatically reduce your monthly car payments.
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New York, NY 10007