How Does Bankruptcy Affect Car Loans and Mortgages?

holding car keys

Like many New York State residents or Americans overall, your life may take an unexpected turn and you may find yourself struggling to pay off your car loans and mortgages. With this, you may worry about what a bankruptcy declaration means for the fate of your cars and houses; assets that you have worked so hard to earn. That is, you may be unsure as to whether these assets can be protected throughout your bankruptcy proceedings or ultimately taken away by your bankruptcy trustee. Follow along to find out how a bankruptcy filing might affect your car loans and mortgages and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq. can work to protect your property.

How does a bankruptcy filing affect my car loans?

You must understand that your car loan is considered a secured debt. This means that you have pledged your car as collateral if you were ever to default on your loan. Further, this means that your lender can legally repossess your car. Unfortunately, these implications apply even when you file for bankruptcy.

Understandably so, this may be a devastating realization to you. We acknowledge that your car may be a necessity for many aspects of your life; namely commuting to work to continue earning a living and thereby continue paying off your non-dischargeable debts. This is why we want you to rest assured knowing that there may be ways in which you may avoid surrendering your car in bankruptcy, and they read as follows:

  • You may complete a court-approved reaffirmation agreement with your current car loan.
  • You may negotiate with your lender and promise to keep your monthly car payments current from here on out.
  • You may reduce the balance you owe on your car loan to the car’s fair market value with a post-bankruptcy loan.

How does a bankruptcy filing affect my mortgage?

Similar to your car loans, your mortgage is considered a secured debt. Specifically, your lender can place a lien on your house and legally seize it or force its sale. However, a bankruptcy filing may work to protect your house thanks to what is known as an automatic stay. That is, the New York bankruptcy court may almost immediately halt such collection activities practiced by your lender.

Further, New York State’s homestead protection law may work to your advantage. With this, you may claim up to $150,000 worth of your house as exempt, or up to $300,000 if you are married. This may show that your home’s equity is not enough to cover your debts if a lender were to seize it and force its sale. Therefore, it may show that it is an unnecessary collection activity to practice.

The best way to protect your assets is to retain the services of a talented Rockland County bankruptcy attorney. So please do not hesitate to contact The Law Offices of Allen A. Kolber, Esq. today.