What Happens to Your Car After Bankruptcy in New Jersey?

Declaring bankruptcy is a significant decision that can affect various aspects of your life, including your vehicle. In New Jersey, understanding what happens to your car after filing for bankruptcy is essential for anyone considering this legal option.

When you file for bankruptcy in New Jersey, your financial situation is evaluated under federal and state laws. Depending on the type of bankruptcy you choose—Chapter 7 or Chapter 13—the fate of your car may differ.

Chapter 7 Bankruptcy: In this scenario, most unsecured debts are discharged while non-exempt assets may be sold to pay creditors. Fortunately, New Jersey provides a vehicle exemption that allows you to keep your car if its value is below a certain threshold. As of the latest guidelines, the exemption for a vehicle is capped at $15,075 for equity. If your vehicle's equity is below this limit, you can retain ownership. If the equity exceeds this amount, you may need to either pay the difference to keep the car or relinquish it to the bankruptcy trustee.

Chapter 13 Bankruptcy: This type of bankruptcy allows you to retain your assets while you repay your debts over a three to five-year plan. If you are current on your car payments and can maintain them during the repayment plan, you typically can keep your vehicle. If you are behind on payments, Chapter 13 may provide an opportunity to catch up on those payments, and the court will protect your vehicle from repossession while you restructure your finances.

Reaffirming Your Car Loan: In some cases, you might choose to reaffirm your car loan during bankruptcy. This involves signing an agreement to maintain your payments even after the bankruptcy is filed. It is crucial to understand the long-term implications of reaffirmation, as it means you are still liable for the debt, and failure to adhere to the payment plan may lead to repossession.

Impact of Bankruptcy on Car Titles: Filing for bankruptcy does not change the title of your car, provided you maintain the loan and payments. However, if the vehicle is sold or transferred to the bankruptcy estate, the title will need to be updated accordingly.

Getting Advice from Professionals: Navigating bankruptcy laws can be complex. Consulting with a knowledgeable bankruptcy attorney in New Jersey can help you understand your rights regarding your vehicle. An attorney can guide you on how to proceed, whether you can keep your car, and what options are available to you based on your financial situation.

Conclusion: For those facing financial hardships, understanding what happens to your car after bankruptcy in New Jersey is critical. Whether you choose Chapter 7 or Chapter 13, the right strategy can help you preserve your vehicle while regaining financial stability. Always consider seeking legal guidance to make informed decisions regarding your assets during bankruptcy.