Many clients are concerned that they will lose their car when going through a bankruptcy case. I am advising clients every day as a South Barrington bankruptcy attorney that most people keep their cars when going through a bankruptcy. Of course, there are certain factors which can cause someone to lose their car. Let’s examine the cases where there is an auto and look to the exemptions and equity. For certain, most debtors do not want to lose their auto. In fact, most debtors would do anything they can to avoid losing their auto. In the case of an auto that has available equity that I cannot protect, the trustee may be willing to allow the debtor to buy out the trustee’s interest. I have had several cases where the amount available above and beyond the exemption is anywhere from $2,000.00 to $10,000.00. When the amount available is $2,000.00 or less, in my experience the trustees are not interested in administering the asset in an individual bankruptcy case. However, when you get up to the $5,000.00 or $10,000.00 unprotected amount, the trustee has a duty and an obligation to administer that asset for the benefit of creditors. In those situations, the trustee would be willing to allow a buyout.
A buyout can happen rapidly, or a trustee could be willing to take a small extended payment plan. However, I would always recommend to my clients if they’re going to do a buyout that they have a lump sum available. Some trustees will not deal with a payment plan, and they will require a lump sum payment. This is where you will need exceptional bankruptcy advice because the trustee now has the power to take the property. Strong negotiating skills and working relationships with the trustees is critical to a good outcome for the debtor.
If I feel that my client has too much equity or too much risk in a particular item and the client does not have the ability to do a buyout or does not wish to do a buyout, then I strongly would discourage that client from filing a Chapter 7 bankruptcy. If there’s an asset that cannot be protected, Chapter 7 bankruptcy is not a good idea. For that client, I may suggest a bankruptcy Chapter 13. Under Chapter 13, the trustee does not take any of the debtor’s property. The debtor simply must pay back over the next three to five years; at least what the creditors would have gotten in the property was liquidated in Chapter 7.