Auto In Bankruptcy

A New Jersey resident may get their repossessed auto back, by filing a chapter 13 bankruptcy case, if the auto was repossessed due to a loan default. However, there are general conditions for the return of the vehicle. Typically, the auto may be save at any time prior to the sale.
The debtor must file a chapter 13 bankruptcy petition, which provides a feasible plan indicating payment of the loan arrears, in addition to the future loan payments. The petition must reflect an ability to make such payments, by way of a budget. Additionally, the debtor must provide proof of adequate auto insurance that covers the finance company in the event of damage.
In general, the finance company will allow the debtor to obtain possession of the vehicle, without upfront payment for towing and storage fees. Such fees are typically paid through your bankruptcy plan.
The auto is typically released after the bankruptcy petition is filed and the necessary bankruptcy and insurance information is provided to the finance company. However, the debtor must travel to pick up the vehicle at the storage lot. The auto’s are generally stored in New Jersey.
Robert Manchel, is a New Jersey attorney that limits his practice to bankruptcy law. He may be contacted at 866 535 5655.

What happens if a person, who does not file for bankruptcy, jointly owns an automobile with a person who has filed for bankruptcy (debtor). The law is the same no matter the relationship between the filing (debtor) and non bankruptcy filing person (ie, friend, son, spouse).
In virtually every case, the debtor is permitted to keep his auto, from the sale of the trustee. Therefore, for this blog, we will assume that the auto does not have substantial value, and the debtor is permitted to keep the auto.
The state law, and not the bankruptcy law, applies to the non filing joint owner. This means that if the payments are current, the non filing person would be able to keep the auto, as if no bankruptcy was filed. The right of the non filing owner to keep the auto will not change no matter what information the debtor provided on his petition, with the exception of fraud. Also, the bankruptcy filing would not modify any terms of the financing.
As long as the payments are made on a timely basis, by any means, the finance company could not repossess the auto. Conversely, if the auto payments come into default after completion of the case and discharge, the finance company can always repossess the auto.
Also, if all required finance payments are made, by any means, or by any person, both individuals would own the auto jointly, after completion of all payments. Per state law, if the the auto payments are in default, the finance company could repossess the auto, sell the auto, and sue the non-filing individual for the deficiency that is due.
No information stated above would change the law relating to the non filing person, whether or not the debtor signed a reaffirmation agreement. However, if the debtor signed a reaffirmation agreement, and the payments fell in default, the finance company would be permitted to repossess the auto and sue both the debtor and non filing individual, for the balance due after auction. If the payments are in default, after the completion of the case and the debtor did not reaffirm the debt, the finance company would not be permitted to sue the debtor, as the debt would have been discharged.
Robert Manchel is an experienced New Jersey bankruptcy practitioner and will answer your questions by calling (866) 503-5655.

In general, when a person satisfies the total amount that must be paid on auto financing, the finance company must transfer the title to the borrower. The same general law applies to auto financing, in connection with a bankruptcy debtor.
A chapter 13 debtor has different options in making auto finance payments.
A  debtor may make monthly finance payments directly to the finance company.  At the time the auto finance company has received full payment, satisfying the debt, the finance company must transfer title to the debtor, even though the bankruptcy case is not completed.
The debtor may pay the prefiling arrears through the chapter 13 bankruptcy plan, while paying the future regular monthly payments directly to the finance company.  The finance company must deliver the title, after the trustee has paid the total arrears, and the debtor has satisfied the balance that is due on the financing.
The debtor may pay the auto company, by way of a cram down. This means that the finance company is paid only the value of the auto, plus a fair rate of interest, through the bankruptcy plan. The difference that is owed, between the value of the auto and the total balance due, is discharged. Under this scenario, the entire amount is not paid to the finance company. Therefore, the finance company need not transfer title until the chapter 13 case is completed and discharged.
If the total balance due to the finance company is paid through the chapter 13 bankruptcy case, the finance company must transfer title, after the trustee has paid the total amount that is due to the finance company, even though the plan has not yet been completed.
New Jersey Bankruptcy Lawyer, Robert Manchel, can be contacted  at 1 (866) 503-5655, to discuss your bankruptcy questions.

We are often asked by our clients how many vehicles they are allowed to own in bankruptcy.
The bankruptcy code does not specify the number of autos that a debtor may own. Therefore, theoretically, the debtor may own as many as they wish.
In a chapter 7, although unusual, the trustee is permitted to sell the debtor’s property that has a substantial value in excess of exemptions. The debtor is permitted to keep all the autos that can be exempted. Each debtor may apply his federal auto exemption of $3,450.00, in addition to any of his excess wildcard exemptions, which may be as much as $11,975.00. If a debtor owns autos that have a value in excess of the total exemptions applied to the vehicle values, the trustee may sell all vehicles that cannot be fully exempt.
In a chapter 7, the debtor cannot have disposable income after payment of his necessary and reasonable expenses. A chapter 7 trustee will not allow a debtor to use two auto payments for one person, as the second payment is not a necessary and reasonable expense.
The same issues relate to a chapter 13 case. The debtor must pay towards the unsecured debt, at least the amount of unexempt value in all vehicles.  Therefore, any portion of an auto that cannot be fully exempted, must be paid to the unsecured debt through the bankruptcy plan. Also, in a chapter 13, the debtor must pay no less than all of his monthly disposable income to the trustee. In general, the trustee will not permit a  person to apply  two auto payments as expenses for one person, as the second auto payment is not necessary and reasonable. In other words the second auto payment is a luxury item and not a necessity. However, it is possible to settle this matter with the trustee and continue paying for the second auto, if the debtor consents to making a higher monthly trustee payment.
Robert Manchel, a New Jersey bankruptcy lawyer will discuss your bankruptcy questions at 1 (866) 503-5655.

We are often asked by our clients what can happen to their vehicles while they are going through a Chapter 13 Bankruptcy case.
A chapter 13 trustee will never sell a debtor’s auto no matter the value. Also, a chapter 13 will permit a debtor to save their auto,  if they are behind with their finance or lease payments.
The filing of a chapter 13 stops the finance company’s ability to repossess the auto. However, immediately upon the filing, the finance company will request proof of auto insurance that adequately covers the finance company as the loss payee or lien holder. If the debtor cannot provide such proof, the finance company will be permitted to repossess the auto.
A chapter 13 debtor has various options regarding their finance payments. A debtor may wish to surrender the auto and classify the financing debt to general unsecured, which is the same as credit card debt. Based on the debtor’s income, expenses, and asset values, the debtor may pay all, none, or a portion of their unsecured debt. If the debtor is current with their finance payments, he may wish to keep the auto and make the monthly finance payments directly to the finance company. Under this scenario, the bankruptcy filing will have no effect on the auto financing.
If someone is behind with their auto finance payments, they may make the regular monthly finance payments directly to the finance company, in addition to paying the arrears through their monthly trustee payments, the same as for mortgage arrears.
If the debtor purchased and financed their auto more than 910 days prior to the bankruptcy filing, he may “cramdown “ the financing debt. This means that the debtor may be able to pay to the finance company only the fair market value of the auto, plus a fair rate of interest, through the bankruptcy payments. Typically, this means that the debtor can keep the auto, by paying less than the balance due on the financing. Also, the debtor can make these payments over a period of 60 months, which may lengthen the payment period that was required under the original financing agreement. Under this scenario, the debtor need not make regular monthly finance payments directly to the finance company, as all payments are paid through the bankruptcy plan.
Also, the debtor may be able to payoff the entire loan, plus a fair rate of interest, through the bankruptcy plan. Under this scenario, the debtor may also, lengthen the time period for repayment of the loan, that extends beyond the original financing agreement. Again, the debtor need not pay the finance company directly.
If the debtor is behind with auto lease payments, he must cure the arrears promptly, through the bankruptcy plan and within the lease expiration period. In addition to paying the arrears through the bankruptcy plan, the debtor must make regular monthly payments to the finance company. The debtor cannot “cramdown” a leased auto.
The bankruptcy lawyer  in NJ., Robert Manchel,  can be reached at 1 (866) 503-5655, to explain how your auto can be saved by filing a bankruptcy case.

We are often asked by our clients what can happen to their vehicles during their Chapter 7 Bankruptcy case.
A chapter 7 trustee will only sell a debtor’s auto if the auto has substantial value. It is unlikely that the chapter 7 trustee will unexpectedly sell a debtor’s auto because the debtor should know the value of the auto and the available exemptions, prior to the filing.
Similar to the liquidation analysis of a house and other assets, the trustee is required to perform a liquidation analysis to determine if he can sell the debtor’s auto(s). The trustee will obtain the fair market value of the auto from his source. Subsequently, the trustee will subtract the finance payoff amount from the value. Thereafter, he will subtract the debtor’s available exemptions in the auto. The exemption amount for one auto is $3,450.00. However, the debtor can use up to $10,850 of unused exemptions of the debtor’s residence, and possibly an additional $1,150.00.
If there is a negative value after the deductions, the trustee is not permitted to sell the auto(s). If there is a positive amount, the trustee may attempt to sell the auto. However, the debtor may prevent the sale, by paying the trustee the amount that would have been received, if the auto was sold. If the debtor wishes to pay the trustee, in lieu of the sale, the funds paid to the trustee, must come from a third party or from the debtor’s exempt funds.
Initially, the filing of a chapter 7 bankruptcy case stops the repossession of an auto. However, if a debtor is behind with their auto payments, the bankruptcy filing will not permit the debtor to save their auto from repossession. In the event that the debtor is behind with their auto finance payments, the finance company will file documents with the court requesting permission to pursue repossession of the auto. The court will permit the finance company to repossess the auto if the debtor is behind with their payments and the trustee is not able to sell the auto.
A Reaffirmation Agreement is an agreement whereby the debtor continues to be obligated and liable to pay the debt, after the bankruptcy case is completed. This means that if the debtor fails to make a payment after the bankruptcy case is complete, the finance company may sue the debtor for the total funds due and repossess the auto, as if no bankruptcy case was filed.
Under the 2005 modified bankruptcy code, the finance company is permitted to repossess the auto, if the debtor fails to sign a Reaffirmation Agreement, which is approved by the court. However, in reality, it is unlikely that a finance company would repossess an auto, in connection with a debtor who is current with the financing.
If the finance company permits the debtor to keep the auto, without signing the reaffirmation agreement, the finance company may only repossess the auto if a debtor falls behind with the payments after the completion of the bankruptcy case. However, if a Reaffirmation Agreement is not approved by the court, the finance company will typically not report to the credit bureaus that the debtor is making timely finance payments.
The debtor always has the opportunity to surrender the auto and discharge the debt to the finance or lease company. The financing or leasing debt will be eliminated or discharged upon the discharge of the case.
Please contact the NJ bankruptcy practitioner, Robert Manchel, at 1 (866) 503-5655, for bankruptcy information.