In Chapter 7 bankruptcy cases, cars are hard to redeem since the law now requires paying the lender the retail replacement value of the car. That value is generally higher than the private sale value that was used under the prior law. It remains possible for a debtor to surrender a car when keeping up the payments is impossible. Under Chapter 13, debtors must repay the entire car loan if they bought a car within 910 days of the bankruptcy filing. For example, if you had an outstanding balance of $6,000 on a car loan whose blue book value was only $4,000, you would be required to pay the entire $6,000 balance if the car was purchased less than 30 months of filing.
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 creates a formal way to assume a personal property lease, such as a car lease, in a Chapter 7 case. The lease will be deemed rejected if the case trustee fails to assume it within 60 days after filing. At that point, the debtor may notify the creditor that the debtor wishes to assume the lease. The creditor may, at its option, notify the debtor that it is willing to have the lease assumed and may condition the assumption on cure of any outstanding default. The debtor then has 30 days after the creditor’s notice to send a further notice that the lease is assumed.
If you have any questions on the topic of car loans as they relate to your bankruptcy filing please feel free to contact me at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia, P.A. Web site at www.miamibankruptcy.info/.
Timothy Kingcade