Can I Sell My Car Before I File Bankruptcy?

Filing for bankruptcy is one of the hardest things you will have to do, yet it is the best way to get rid of all the debts and start over (financially speaking). Yet this is a very delicate time. Debtors have to be very careful with their behavior when they are about to file up for bankruptcy. Any kind of sale that the debtor has made, has to be done the proper way. For example, you are allowed to sell your car prior to filing for bankruptcy, but you have to put on the car a price which represents the true value of the used vehicle. Not doing so can be interpreted as you’re attempting to intentionally lower your asset which is considered fraud, and can get you into some legal trouble and interfere with the bankruptcy process.

Generally speaking, you are allowed to sell the car prior to filing for bankruptcy, but you need to take into consideration the true market value of your car. If you sell your car for half the price, for example, you might be accused for purposefully diminishing the value of your assets. You’re not allowed to pass the car to brothers, sisters, parents or other kind of relatives because the trustee is entitled to sue your relative for the car’s return and you would get yourself and your relatives in trouble.

Don’t try to sell or trade anything before you hire an experienced bankruptcy attorney. That is the absolute first thing you should do. No matter how experienced a lawyer is, if he or she isn’t working exclusively on bankruptcy cases than you shouldn’t put very much trust in his (hers) advice because every case is different and has different people in different “levels” of bankruptcy. Just as a curiosity, you can compare the advice from another lawyer with the one you hired.

Let’s see how you can sell assets in bankruptcy.

First of all you need to establish with the lawyer on what chapter should you file your bankruptcy.

For example if you decide to file for Chapter 7 bankruptcy than you won’t be allowed to hold on to valuable assets such as your car. There are certain rules and guidelines in the bankruptcy codex that should specify in what cases you can keep some assets and the values these assets should have. Let’s say that you would like to keep your car, well if the car is estimated at a fair market value of over $5000 than, most likely you will not be allowed to keep it. You can consider Chapter 7 bankruptcy as liquidation or collateral because the creditor will take your assets in order to make up for some of the money you still owe them.

On the other hand, Chapter 13 bankruptcy is a bit different and you will file for it in case you still have a monthly income. Because of the fact that you need to get to the workplace day after day, you will definitely want to keep your car. Chapter 13 is considered to be a better solution for those who desire to keep their cars. In case of a Chapter 13 bankruptcy, the court will settle a payment plan and a series of terms that come with it. The debtor must agree with all the conditions that come with the payment plan. This payment plan usually is settled for a longer period of time so that the debtor can manage to pay it. After and only after that period, when the debt will be completed, the case will be 100% closed.

Post tags: Tags: bankruptcy, car sales