If I claim bankruptcy and have a 19,000 loan on a car worth 7,500 will I lose the car? Other than this I have about 38,000 in various credit card debts.
vehicle in bankruptcy
Posted on Monday, November 27, 2006
posted by Questions @ 3:33 pm
1 Expert Comment:
At November 28, 2006 |
4:35 pm
, Barton Goth, GCO Inc. Bankruptcy Trustees Said...
There is always a possibility that you would loose the care (and this might be in your benefit considering the value of the car and the associated debt) What happens is a car loan (i.e. secured creditor) is something that operates outside of the Bankruptcy and Insolvency Act. Therefore if you file bankruptcy or a proposal the car loan is not necessarily affected. However, secured contracts are often written so that the lender retains the right to seize the vehicle if an “act of default” occurs. Now the most common “act of default” is not making payments, however, they often include the filing of a bankruptcy as an “act of default” as well. What this means is that the secured lender has the right to make a decision and could elect to seize the car simply because a bankruptcy has been filed. Having said this, nothing suggests they will seize the car, often the lenders would prefer you to make the payments on the vehicle (and if this is done prior to bankruptcy the shortfall will be cleared by the bankruptcy).
What I would recommend is for you to consider returning the vehicle prior to filing a bankruptcy. Once you have returned the security (i.e. the car) the lender is no longer considered secured and no longer operates outside of the Bankruptcy and Insolvency
Act, therefore any shortfall etc. would be cleared by the filing of the bankruptcy. The key is that you must return the car and cease making payments prior to filing, if you wait and do this after you file the bankruptcy you won’t be cleared from the shortfall.
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