Thursday, February 2, 2012
I am a bankruptcy attorney in Phoenix ($995/Chapter 7) and see clients with all different kinds of situations regarding their cars. Generally in bankruptcy you are allowed to keep one car, provided you don't have more equity in it than the allowance granted by the bankruptcy laws (which vary state by state). Ironically, this means if you have a $90,000 Mercedes, but owe more than $85,000 on it, you get to keep it in Arizona. But if you have an older Chevy Tahoe worth $8000, that you have completely paid off, you will lose it! Arizona allows you to keep a vehicle with up to $5000 equity in it.
So what do you do if you have the Tahoe? You could sell it and buy another vehicle with payments. Just make sure you spend the proceeds wisely, not on extravagant things that will raise the eyebrows of the bankruptcy court or by paying off creditors. And you must sell it for a fair price, not trying to sneakily sell it to your mom or close friend for a fake reduced price.
Or, you could take out a lien on it to get your equity down to $5000. In that case, make sure the lien is aboveboard and not a fake. It is considered fraud to make a transaction like this for less than fair market value, and the bankruptcy court will likely ask for your bank statements to see that you really did receive the money and spend it on necessities. Transactions between family members will be scrutinized even more closely.
Bankruptcy law is not a perfect fit when it comes to vehicles. It punishes people who have successfully paid off their vehicles. Don't ask me, I don't make the laws!
The Alexander Bankruptcy Law Firm provides low low cost Chapter 7 and 13 personal bankruptcies. $995 Chapter 7 or $2500 Chapter 13 bankruptcies plus court filing fee. Free consultation with a compassionate attorney who will handle your case personally. Call 24/7, available to meet with you around your schedule. 602-910-6812. Conveniently located in Central Phoenix along the Camelback corridor. AlexanderBankruptcyLawFirm.com
Posted by Rachel Alexander at Thursday, February 02, 2012