Can I Keep My Car If I File For Bankruptcy in Arizona?

Understanding Vehicle Exemptions in Arizona Bankruptcy Cases

Filing for bankruptcy in Arizona often prompts a pressing question: “Can I keep my car if I file for bankruptcy?” For many people, a vehicle is an essential asset, used for daily commutes to work, school, and other crucial activities. The prospect of losing it can be frightening. The good news is that, with the guidance of an experienced Mesa bankruptcy lawyer, it’s possible to keep your car during and after bankruptcy.

Bankruptcy laws can be complex and they vary from state to state. But in general, they’re designed to help individuals struggling with debt regain their financial footing, not to strip them of all their belongings. A Phoenix bankruptcy lawyer can guide you through the complexities of Arizona bankruptcy laws, especially regarding vehicle exemptions.

Can I Keep My Car If I File For Bankruptcy in Arizona?

Arizona Car Exemptions in Bankruptcy 

When you file for bankruptcy, certain properties and assets are protected by what’s called ‘exemptions.’ These exemptions vary from one jurisdiction to another. In Arizona, there is a specific motor vehicle exemption that can protect your car during a bankruptcy filing. A Tucson bankruptcy lawyer can explain that this exemption allows you to protect up to a certain amount of equity in your vehicle.

In Arizona, individuals filing for bankruptcy can protect up to $6,000 of equity in their motor vehicles or other vehicles. This exemption allows you to retain ownership of the vehicle even if there is equity in it. For instance, if your car is valued at $10,000 but you still owe $7,000 on it, you have $3,000 in equity. By utilizing the Arizona motor vehicle exemption, you can safeguard this $3,000 equity and keep your car when going through bankruptcy.

However, for those who are physically disabled, the exemption amount is doubled to $12,000. This means that physically disabled individuals filing for bankruptcy can protect up to $12,000 in equity in their motor vehicles or other vehicles, allowing them to retain ownership even if the vehicle holds equity up to that amount.

Additionally, in Arizona, married couples who file a joint bankruptcy petition have the advantage of doubling the exemption amounts. This implies that if you are married and filing for bankruptcy jointly, you can protect up to $12,000 in equity in your motor vehicle.

Chapter 7 vs. Chapter 13 Bankruptcy

The type of bankruptcy you file will also affect what happens to your car. In a Chapter 7 bankruptcy, non-exempt assets can be sold to repay creditors. However, if your car falls under the Arizona vehicle exemption, or if there’s a loan on the car and you’re up-to-date with payments, you may be able to keep it.

It’s also important to know that since your car is considered a secured debt, it cannot be discharged in bankruptcy. If you have been unable to keep up with payments or have chosen not to continue paying for the car, the only recourse is to allow the lender to repossess the vehicle. It is not possible to discharge the debt and retain possession of the car simultaneously.

In a Chapter 13 bankruptcy, you can typically keep all your assets, including your car, but you need to include all your debts in a 3-5 year repayment plan. A Glendale bankruptcy lawyer can help you figure out a manageable repayment plan that includes your car loan.

Other Factors to Consider

It’s also important to note that if your car is subject to a loan and you’re behind on payments, the lender may still be able to repossess it, regardless of bankruptcy. However, bankruptcy can sometimes delay repossession, and it may give you a chance to catch up on missed payments.

It’s also worth exploring the option of ‘redeeming’ your car in bankruptcy, which involves paying the lender a lump sum equal to the car’s current value, or ‘reaffirming’ your car loan, which essentially takes that debt out of bankruptcy. Both of these options carry their own risks and benefits, which an Ahwatukee bankruptcy lawyer can help you weigh.

Contact a Bankruptcy Attorney in Arizona Today

If you’re considering bankruptcy and are worried about keeping your car, let the team at Arizona Bankruptcy Law Attorneys help. Our expert bankruptcy lawyers can guide you through the process, providing clarity on exemptions, the differences between Chapter 7 and Chapter 13 bankruptcy, and strategies to protect your assets.

Don’t navigate these challenging waters alone. Contact us today and let us help you on your journey toward financial stability.

This article is courtesy of Blake Goodman P.C., a leading bankruptcy firm located in Hawaii. The firm specializes in providing personalized advice on bankruptcy matters, including asset protection and debt relief strategies for complex financial situations.


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