Many Florida residents file Chapter 7 bankruptcy out of need when they are overwhelmed by their financial obligations, and this often puts the debtor’s vehicle in jeopardy of , or confiscation. Property that is paid off and clear of liens can be seized and sold by a bankruptcy trustee when an outstanding creditor is demanding payment. This means that some vehicle owners in Florida will need to make protection arrangements for the vehicle before they begin the bankruptcy process.
Restructure the loan
The first option a Chapter 7 petitioner may use is obtaining a new loan that pays off the old note and begins a new one. Lenders will often be receptive to this move because it generates more profit and a typical loan will be paid off before future bankruptcy restrictions will expire. However, the payment plan must be feasible based on future income levels.
Pay off the loan
Another remedy may be to pay the balance owed on the vehicle, but the court must not be able to confiscate the vehicle after the fact. This is accomplished by filing a Motion to Redeem with the court. Preparing for a bankruptcy filing may include making some alterations to total debt amount and specific collateral property, and paying off some outstanding debt may be best for maximizing discharged unsecured debt. This can apply both when there is little owed on the vehicle or more than the actual value, but it must be approved by the case trustee.
Redemption funding is often available for petitioners, but it is important to be aware of potential scams or lending agencies that will take advantage of the situation with exorbitant interest rates. Always make sure the terms of the redemption loan are stated up front, and look for the best rate possible due to potential payment difficulties after the bankruptcy is approved.
