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Cars and Bankruptcy
While Renton Transit provides excellent public transportation, routes are limited, so most residents in the city need their vehicles. In Renton neighborhoods like Fairwood and Maplewood Heights in the South and East, there are often no choices for public transportation. Luckily, there are options to keep your car when you are facing overwhelming debt.
Under 11 U.S.C. § 522(f), Washington State's exemption laws allow you to protect a vehicle up to $15,000 in equity if you file for Chapter 7 bankruptcy. If you owe more than your car is worth or are behind on payments, Chapter 13 bankruptcy under 11 U.S.C. § 1325(a) can help restructure the loan, sometimes even lowering the balance to the car's market value. If your vehicle has already been repossessed, Washington State law (RCW 62A.9A-609) outlines your rights and potential options to reclaim it.
Our Renton bankruptcy attorneys can help those facing repossession or struggling with car loan debt. We have 30 years of experience guiding clients through the legal options available under Washington State and federal law. Call now for a free consultation and find out how to protect your vehicle while getting the debt relief you need.
Can Bankruptcy Help Me With My Car Loan In Renton?If you're struggling to make car payments, bankruptcy can help in several ways, depending on whether you file for Chapter 7 or Chapter 13:
- Chapter 7 Bankruptcy: With Chapter 7, you may be able to eliminate your car loan if you surrender the vehicle, or you can redeem it by paying its current market value instead of the full loan balance (11 U.S.C. § 722). If you're current on payments, you might also reaffirm the loan and keep your car.
- Chapter 13 Bankruptcy: With Chapter 13, you catch up on missed car payments through a structured repayment plan while keeping the vehicle. If your car loan is more than 910 days old, you may qualify for a cramdown under 11 U.S.C. § 506, reducing the balance to the car's fair market value.
Many Renton residents rely on their cars for work, especially in areas with limited public transit, like the Highlands or Fairwood. If you're worried about repossession, bankruptcy can stop it immediately under the automatic stay (11 U.S.C. § 362).
Can I Keep My Car In Bankruptcy?Yes, you can often keep your car in bankruptcy, but it depends on a few factors, including:
- Washington State Exemptions: Under RCW 6.15.010, you can exempt up to $15,000 in vehicle equity.
- Loan Status: If you're behind on payments, Chapter 13 allows you to catch up, while Chapter 7 may require you to surrender the car or reaffirm the loan.
- Car's Value: If you've fully paid off your car and it is worth more than the exemption limit, the bankruptcy trustee may sell it to pay creditors in Chapter 7.
If you drive an older car and have paid it off, bankruptcy courts generally won't force you to sell it if its value is under the exemption limit. Renton residents who drive to work or school in Bellevue or Seattle on I-405 can use Chapter 13 to keep their cars while catching up on payments.
Our Renton Lawyers Answer Your FAQs About Cars And BankruptcyQ: What happens if a creditor already repossessed my car in Renton before I filed for bankruptcy?
A: If your car was repossessed but the creditor has not sold it yet, filing for bankruptcy may force the lender to return it under 11 U.S.C. § 542. Vehicle returns are more likely in Chapter 13, where you can include the missed payments in your repayment plan. If the creditor has already sold your car, you cannot get it back, but you can discharge any remaining deficiency balance.
Q: Can I lower my car loan balance through bankruptcy?
A: Yes, but only under Chapter 13 bankruptcy through a cramdown (11 U.S.C. § 506). If your car loan is more than 910 days (about 2.5 years) old, you can reduce the loan balance to the car's actual value, and the rest becomes unsecured debt, which can be discharged. For example, if you owe $15,000 on a car worth $10,000, you might only have to pay $10,000.
Q: Will bankruptcy remove a judgment lien on my car?
A: If a creditor placed a judgment lien on your car, you may be able to remove it in bankruptcy under 11 U.S.C. § 522(f) if it interferes with your Washington State vehicle exemption. Called lien avoidance, it can help protect your car from being taken by creditors.
Q: How does Washington State's vehicle exemption work in bankruptcy?
A: In Chapter 7 bankruptcy, you can protect up to $15,000 of equity in one car under RCW 6.15.010(1)(c). If you're filing jointly with a spouse, you can double that exemption to $15,000 if you both own the vehicle. If your car's equity exceeds these limits, the bankruptcy trustee may sell it to pay creditors unless you apply for a wildcard exemption or file for Chapter 13, where you can keep your car as long as you follow the repayment plan.
Q: Can I use a federal exemption instead of Washington's vehicle exemption?
A: No. Washington State is an opt-out state, meaning you must use Washington's exemption laws rather than the federal bankruptcy exemptions under 11 U.S.C. § 522(b). However, Washington State does allow a wildcard exemption under RCW 6.15.010(1)(d)(ii), which can protect additional car equity.
Q: What if my car loan has a co-signer?
A: When you file for Chapter 7 in Renton, your co-signer remains fully responsible for the car loan, even if you discharge your obligation. However, in Chapter 13 bankruptcy, you can protect your co-signer under the co-debtor stay in 11 U.S.C. § 1301 as long as you continue making payments through your repayment plan.
Our Renton Bankruptcy Lawyers Fight To Keep You On The Road
Worried about losing your car in bankruptcy? Washington law (RCW 6.15.010) allows exemptions to protect your vehicle. Chapter 13 will also help you catch up on payments and prevent repossession. If you depend on your car for work, whether you commute from Renton to Seattle or rely on it for daily errands, bankruptcy may help you keep it. Call us today to protect your transportation.
