• Three Car Options in Chapter 7

    On Monday, I touched on cramming down a car loan in a Chapter 13 bankruptcy . Today, I wanted to touch on the three car options available to debtors who are filing Chapter 7 :

    • Surrender – This option is typically beneficial if you owe more than your vehicle is worth or if your car is too expensive. Surrendering a car will mean you no longer owe the remaining balance on the loan. The major drawback to surrender is that you will obviously have to find another mode of transportation. Furthermore, the bankruptcy filing will also result in higher interest rates through subprime lenders, meaning many people who surrender their vehicles in Chapter 7 cases have to settle for vehicles that are not as nice as the ones they gave up.
    • Reaffirmation – Instead of surrendering a car, this option allows you to continue to be responsible for a car loan as though you never filed bankruptcy. If you are able to demonstrate that you need the automobile, you can sign an agreement with the lender indicating you will continue paying for the car. However, a debtor reaffirming a car loan becomes liable for the auto loan. This means that if the lender repossesses the vehicle to sell at auction because you miss payments after the bankruptcy discharge, you will be responsible for the deficiency balance and auction fees.
    • Redemption – This is certainly the least used option of the three I have listed here, because it requires you to pay the lender the current value of the car in one lump sum. This can be great in the sense that you keep the car and no longer have to worry about monthly payments, but it can be extraordinarily difficult to come up with the amount needed for the lump sum payment. Furthermore, you also need to agree with the lender on the valuation of the vehicle, which can be easier said than done.

    Have you been thinking about filing bankruptcy, but are concerned about what will happen with your car? If so, you should contact my firm today at (866) 930-7482 to schedule an initial consultation where I can tell you what all of your options are.

    Benjamin Brand Services – Chicago bankruptcy attorney

  • Famous Bankruptcies: Mike Tyson

    A former heavyweight champion who amassed roughly $400 million over two decades and could once command $30 million for a night’s work, Mike Tyson ultimately had to file bankruptcy in 2003. The New York Times reported in August of that year that Tyson had $23 million in debts specified in Chapter 11 petitions he filed with the United States Bankruptcy Court in Manhattan. In 2004 though, the Associated Press reported that Tyson owed $38.4 million to various creditors including the Internal Revenue Service and his ex-wife, Monica.

    As the Times put it, Tyson’s “record earnings in the boxing ring became a license to spend — on jewelry, mansions, cars, limousines, cellphones, parties, clothing, motorcycles and Siberian tigers.” For example, the Times reported in that article that Tyson had “picked up a $173,706 gold chain lined with 80 carats in diamonds” from a Las Vegas jewelry store, but never paid for the item.

    While it is highly unlikely that your own lifetime earnings or spending on extravagances are anywhere near as astronomical as Tyson’s, perhaps you can still relate in the sense that an increase in salary led you to spend more than you should have. Many people spent beyond their means when times were good and then found themselves unable to pay the bills when they became unemployed or took a new job that pays significantly less than what they had been earning.

    However, just like Tyson, filing bankruptcy can allow you to manage your debt if you are struggling to pay your bills or seeking foreclosure help . A Chapter 7 or Chapter 13 bankruptcy could allow you to reorganize or eliminate you debt, as well as deliver a knockout punch to creditor harassment.

    Benjamin Brand Services – Chicago bankruptcy lawyer