Can I sell my car prior to filing bankruptcy? 

Can I sell my car prior to filing bankruptcy? 

A common question clients ask is whether they can sell or trade in their vehicle prior to filing bankruptcy.   If using the Florida exemptions your allowed to have $1,000 in equity in your car.  If you rent then  you would have another $4,000 in exemptions to use on a car or you other personal property.  For example, if the loan payoff on your car is $15,000 and the value of your car is $20,000, you would have $5,000 in equity in your vehicle.  If you rent, you would owe nothing to the trustee (we could exempt all of the equity in the vehicle).

If you owned a home you would owe $4,000 to the trustee to keep your vehicle.  People often ask why they would have to pay the trustee for a car that is paid off.  The exemption amounts are a protection against people spending all of their money to accumulate assets then paying nothing back to their creditors when they file for bankruptcy.

The trustee will use Kelly blue book, private party value.  We generally recommend obtaining a certified appraisal if you are over the exemption amount since Kelly blue book doesn’t account for a variety of factors such as the actual condition of the vehicle, mechanical issues or whether the vehicle has ever been involved in an accident. Many times once the vehicle is evaluated by an appraiser particularly if it’s an older vehicle with high mileage, the value will often be less than the Kelly blue book value.

If you trade in your car prior to filing bankruptcy you run the risk of having to pay back that amount to the trustee.  For example if you received a  $6,000 credit for trading in your current vehicle for a new one, the trustee could say you converted a non-exempt asset into an exempt asset so that amount of money would have to be paid to the trustee.  All transfers of either personal property including cars or homes have a two year disclosure period.  Under most circumstances, unless there is a reason to get rid of the vehicle, such as an immediate emergency mechanical issue, its best to just have your vehicle appraised and not sell it until your case is concluded to avoid such issues.

 

How to Rebuild Your Credit after Bankruptcy 

How to Rebuild Your Credit after Bankruptcy 

People often ask how to rebuild their credit after filing bankruptcy or how bankruptcy will affect their credit.  I am often asked if filing for bankruptcy will destroy credit for 10 years.  Most clients are surprised at how quickly their credit rebounds after filing their cases.  The ability to get a credit card or loan after filing is relatively easy to do.  Of course, we don’t recommend incurring debt during or immediately after filing but getting a credit card is typically achievable.  By getting a small secured credit line at your bank where you are putting in a collateral of cash in a deposit account can rebuild your credit. Additionally, becoming an authorized user on someone else’s credit card will also help build good credit history.

Making other payments such as your car payment on time will help rebuild your credit.  While it’s not unheard of to get a car loan upon filing for bankruptcy, most car lenders will require a discharge which happens 90 days after filing your case in order to get a car loan.  Bankruptcy allows you to surrender a car that is underwater without having to pay anything to the lender.  This allows people to buy a car outright or get new financing and a lower car payment without having to trade in a car with negative equity.

Regarding home loans, there are different types of home mortgages that you could be eligible for.  In order to qualify for a conventional mortgage, it can take anywhere from 2 years to 4 years from the date of your discharge.  To qualify for an FHA or VA loan, it may take as little as 1 year and up to 2 years from your date of discharge. I recommend once some time has passed after you receive your discharge to contact a licensed mortgage broker to see what type of loan you might be able to qualify for.

Should you have any questions, feel free to contact my office at (813) 463-8000 and we would be happy to answer any of your questions or concerns.

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