How to File for Bankruptcy and Keep Your Car
You can file for bankruptcy and keep your car. How to do so depends on the type of bankruptcy you file, your car’s value, and your loan status.
Expert tips on managing bankruptcy
Find out how to manage debt effectively. Learn about debt relief, bankruptcy, and find ways to become debt-free.
How to file bankruptcy for credit card debt
Review your finances
Asses your eligible debts, income, and assets. Decide if bankruptcy is the right solution.
Determine eligibility
To file for Chapter 7, you need to pass a means test. Otherwise, you have to file for Chapter 13.
Go to credit counseling
You must complete a court-approved credit counseling session within 180 days before filing.
File for bankruptcy
Submit the required forms to the federal bankruptcy court to start the legal process and resolve your debt.
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Which Debts Can’t Be Discharged in Bankruptcy?
Bankruptcy discharges certain debts, but not all. Non-dischargeable debts include child support, tax debt, and alimony.
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What happens when you file for bankruptcy?
When you file for bankruptcy, an automatic stay is put in place, stopping collection efforts. The court reviews your finances to decide how your debts will be handled. Depending on the type, some debts may be discharged.
How much debt do you need to file bankruptcy? There is no minimum. The general rule of thumb is that you should have over $10,000 in dischargeable debts.
Before you walk away from debt or file for bankruptcy, consider credit counseling or a debt management plan. Talk to a bankruptcy attorney. They can guide you through the process and teach you how to file for bankruptcy and keep your car under your state’s exemption laws.
How long does it take to file bankruptcy?
A Chapter 7 bankruptcy case takes about four to six months from the time you file until your debts are discharged. That is assuming everything goes smoothly and you have all the necessary documentation ready.
Chapter 13 bankruptcy generally lasts three to five years. This is because it involves a repayment plan that you must adhere to over that period.
Does bankruptcy clear tax debt?
Bankruptcy can clear some tax debt, but not all. Income tax debt may be discharged under Chapter 7 if it’s at least three years old, was filed on time, and meets other IRS requirements. Payroll taxes and recent tax debts usually aren’t eligible.
Best way to rebuild credit after bankruptcy
To rebuild credit, start by making on-time payments on all your bills. Consider applying for a secured credit card or credit builder loan. Keep your credit utilization under 10% and review your credit report.
You can also use loans after bankruptcy to improve your score. Always pay on time and make sure the loan is affordable.
Frequently Asked Questions
How does bankruptcy affect your credit?
Bankruptcy lowers your credit score by over 100 points and remains on your credit report for up to 10 years. It signals to lenders that you’ve had serious financial difficulties.
What does it mean to file for bankruptcy?
Filing for bankruptcy means you’re legally declaring that you cannot repay your debts. The court reviews your finances and determines how to handle your debt. Bankruptcy provides relief from overwhelming debt but will damage your credit.
Can you file for bankruptcy on credit cards?
You can file for bankruptcy due to credit card debt. In most cases, credit card balances are considered unsecured debt and can be discharged through Chapter 7 or included in a repayment plan under Chapter 13.
Can you file bankruptcy and keep your house?
You can file for bankruptcy and keep your house, especially under Chapter 13. If you’re current on your mortgage and your home’s equity is within the exemption limits, you may retain it. In Chapter 7, you could lose the home if there’s significant equity beyond what’s protected by state or federal exemptions.
What kind of loan debt is not alleviated when you file for bankruptcy?
Debts that are typically not discharged in bankruptcy include secured loans like your mortgage or auto loan, and most student loans. These obligations must still be paid even after the bankruptcy process. In rare cases, student loans may be discharged if you can prove undue hardship through a separate legal proceeding.