You might want to know how to get rid of your car in bankruptcy. But if you really want to know how to keep your car through your bankruptcy case, that was the subject of an earlier post (linked above).

Not everyone wants to keep their car through bankruptcy. Sometimes, the monthly car payment is too high, or the car has developed problems that require expensive repairs in order to keep it in good running order. And sometimes you just decide that you no longer need the car at all.

Especially in northern New Jersey, not everyone needs a car for work. Many people work in NYC or within the urban area not far from where they live, such as within Jersey City or Newark, and they take public transportation. It happens that people often make the transition from having to drive to work – say, to a more suburban area of New Jersey – to being able to take public transportation to get there.

Car Loans Are Dischargeable In Bankruptcy

First, you should know that your car loan is dischargeable in bankruptcy, just like credit card debt. Decide whether you need a car after bankruptcy. This decision will help guide your next actions.

If You Need Another Car

While you are in a Chapter 7 bankruptcy, your car cannot be repossessed due to the automatic stay, although the automatic stay can end as to your car a little earlier than the end of your bankruptcy case, under certain circumstances. If you need a car but you want to get a different car from the one you have now, you will need to wait until your bankruptcy is over before you can get a new car. Because you need a car, you may want to continue making your current car loan payments until you are certain that you can get another car.

Getting another car can be as simple as waiting until after the end of your Chapter 7 case. Or it can be as complicated as getting permission to get a new car loan during your Chapter 13 plan. Your exact strategy will depend on the specific issues in your case.

If You Don’t Need Another Car

Planning is a lot easier if you don’t need to get another car at all. In this case, you simply stop paying on the car loan. You should stop paying on the car loan once you have decided that you no longer need the car and once you have cleaned your personal belongings out of it.

You can stop paying on the car before your bankruptcy, during your bankruptcy, or after the bankruptcy. In each of those cases, your bankruptcy will take care of discharging the car loan, if you are filing a Chapter 7. If you are filing a Chapter 13, you may be repaying some or all of the car loan through your bankruptcy case, since Chapter 13 involves some level of repayment.

You Can Get A Car Loan After Bankruptcy

So many people believe that they “can’t buy anything,” or that they won’t be able to take out a new loan after bankruptcy. This isn’t true. First – of course you can buy things after bankruptcy. There’s nothing to stop you from saving up enough to pay cash for a used car after bankruptcy, except for your ability to earn enough cash to save up, which is a challenge for many.

Second, you can get a car loan after bankruptcy. Keep in mind that the loan terms won’t be the best terms – you did just come out of a bankruptcy, after all – but don’t be surprised if a car dealership is ready to throw a new car loan contract at you the same day that your bankruptcy case ends. Writing up new car loans is how car dealerships make their money.

If you’ve got questions about how to get rid of your car loan in bankruptcy, or if you need to use bankruptcy to get out of a bad car loan, call (201) 676-0722 to schedule a free telephone consultation with attorney Jennifer Weil, or go to my Setmore page.