The short answer to that question is yes. It really doesn’t matter whether the car is repossessed by being towed out of your driveway in the middle of the night, or whether you voluntarily and cooperatively turn over the car to the lender because you couldn’t afford to make the payment.
If the lender sells your vehicle for less than you owe on it, you will be responsible legally for paying the difference (otherwise known as a deficiency). This is a little less of a problem in recent months due to car shortages, there tends to be more equity in vehicles than there has been in the past, meaning the lender in many cases can sell the car for more than you owe on it. The good news is that filing for bankruptcy will discharge a deficiency judgment against you.
It is recommended to never trade in a vehicle with negative equity and add it to your current vehicle loan. This forces you as the borrower to be in a position where you cannot sell it for more than you owe on it. Typically, that is usually accompanied with a high monthly payment. It also puts you in a position where if the car has mechanical issues it makes it even harder to get rid of it because you can’t break even if you sell it.
If you do have any questions about prior vehicle repossessions or if you are considering turning in your car, feel free to contact our office to discuss your options.
When you file your case both a bankruptcy trustee and a judge are assigned to your case. Their roles are very different. The person with whom you’ll have your 341 hearing is actually the bankruptcy trustee not the judge.
The trustee is usually either an attorney or a certified public accountant that reviews your case and administers any assets to your creditors. For example if you are over the exemption amount by $1,500, you would pay that $1,500 to the Chapter 7 trustee and out of that $1,500 the trustee would collect a fee and they would distribute a pro rata share to any creditors who file claims in your case.
The trustee can also collect any insider payments in the past year (any money that you have repaid to friends or family members) or any gifts over $600 to any one person in the last two years. Its very important for your attorney to thoroughly review all of your bank statements and information to make sure there are no unforeseen issues on what you might have to pay the trustee.
That is also why it’s very critical to tell your attorney 100% of information so you can get proper advice on whether it’s in your best interest to file you case or whether it might be beneficial to wait to file your case. The trustee is objective is to find money to pay your creditors.
Although, creditors may also hire their own attorney to represent their interests. The judge is there to make rulings if there is a dispute between you and the trustee in terms of value of property or any other issue that may arise. In most cases there are no assets to distribute, but the trustee files the appropriate paperwork and the judge orders the discharge of your case.