When I surrender my car is it an unsecured loan? 19 Answers as of June 28, 2011

When I surrender my car, is it now an unsecured loan? Can I now file for bankruptcy and get the loan discharged along with my personal loan that is also with the same lender? Someone said because I have equity in my home although I just recently had it modified due to my husband's job loss, I am unable to qualify to file Chapter 7. Is that true?

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Financial Relief Law Center
Financial Relief Law Center | Mark Alonso
Each state has laws as to how much equity is allowed in order to qualify for a Chapter 7 bankruptcy. If you do qualify, and surrender the vehicle, any debts relating to the vehicle would be wrapped into the bankruptcy and discharged. It is important that you find out your state's exemption laws to determine if you qualify.
Answer Applies to: California
Replied: 6/28/2011
Burnham & Associates
Burnham & Associates | Stephanie K. Burnham
Car debt is only secured by the automobile it relates to, the debt becomes unsecured when you turn in the car. Whether you turn in the car before Bankruptcy or not, the debt is dischargeable. Just because you have equity in your home does not mean you will not qualify for a Chapter 7 Bankruptcy. Each person's situation is different, you cannot rely on what happened in "someone else's" situation, nor can you rely on their advice. Only a Bankruptcy Attorney can assist you in determining what you qualify for, and what fits your situation best.
Answer Applies to: New Hampshire
Replied: 5/17/2011
Law Offices of Michael J. Berger
Law Offices of Michael J. Berger | Michael J. Berger
Yes, if you surrender your car any remaining balance due then becomes an unsecured debt. Yes, that debt can be discharged along with any personal loan that you got from the same lender. You can have equity in your home and still qualify for a Chapter 7 bankruptcy, but you should get an appraisal of your home or broker's price opinion in addition to checking the value of your home on websites to be sure that the amount of the equity in your home is less than the amount of your homestead exemption. You will need to determine the amount of your homestead exemption based on your age, disability if any, family size and income. Call me and I will do this for you for free.
Answer Applies to: California
Replied: 5/17/2011
Law Office of Larry Webb
Law Office of Larry Webb | Larry Webb
When you surrender a car, the deficiency is an unsecured debt and the lender may sue you to collect and/or get a judgment. The equity in your home can be protected by the homestead exemption for the jurisdiction (state) that you live in. Start with the fair market value of your home, subtract your mortgage, subtract your homestead and the remainder (if any) is the equity that belongs to your bankruptcy estate. What did you have modified due to your husband's job loss? This statement does not make sense. Income, as computed by the MEANS TEST, is what determines whether or not you are eligible to file a chapter 7.
Answer Applies to: California
Replied: 5/16/2011
Law Offices of Michael T. Krueger
Law Offices of Michael T. Krueger | Michael Krueger
You have raised several questions and I believe you were given bad advice on each of them. If you intend to surrender your car you might consider surrendering your car through bankruptcy to ensure no deficiency judgement or tax consequences would come from the action. Your personal loans are unsecured if the lender never recorded a lien against property. If the loan is unsecured it will be treated the same as a credit card unless the creditor files an action that would refute the security of the loan. Regarding the loan modification; congratulations! You are among a very rare group of individuals. The eligibility for Chapter 7 is dependent upon the means test. If you make under your state's median income after all factors are taken into consideration you can file a Chapter 7. The equity in your home will determine if a Chapter 7 is a good idea considering Chapter 7 is a liquidation of assets. In California, a debtor can exempt up to $100,000 in equity in the home under section 704. If the debtor is over the age of 65 the exemption amount is higher. I recommend discussing your situation with an experienced bankruptcy attorney in your state.
Answer Applies to: California
Replied: 5/16/2011
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    Some equity is protected by a "homestead exemption." This varies from state to state. Check with a lawyer where you live. There is not enough information here for me to answer this question.
    Answer Applies to: California
    Replied: 5/13/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    Once a car is turned over to the lender a deficiency becomes a dischargeable debt in bankruptcy. It is treated along with other unsecured debts. Property owned at the time of the bankruptcy is liquidated by the trustee unless the property is exempt. For example, your residence is subject to a homestead exemption fora designated amount that depends on marital status, age or disability. These is a serious issue and you should seek the advice of an attorney who is a certified specialist in bankruptcy law. Consult the State Bar for a listing of those attorneys in your area.
    Answer Applies to: California
    Replied: 5/13/2011
    Cohen & Kendziorra, P.A.
    Cohen & Kendziorra, P.A. | Robert S. Cohen
    Once a vehicle is surrendered or repossessed, then the deficiency on the vehicle when sold by the bank is an unsecured claim and is dischargeable in bankruptcy.
    Answer Applies to: Florida
    Replied: 5/13/2011
    Law Offices of J. L. Haddock, PLLC
    Law Offices of J. L. Haddock, PLLC | Jared L. Haddock
    If you surrendered the car to the finance company, then the deficiency balance (the amount you owed plus the costs of reselling less what the finance company received on resale) is unsecured debt. They already have the car and cannot take it twice. As an unsecured debt, this is generally dischargeable in bankruptcy. As for the second question, this simply is not true. Equity value in a home has no bearing on eligibility for Chapter 7, but it may impact the advisability of it. In other words, depending on the several variables (the equity value of the home right now, the state in which it is located, if it is a your homestead, whose names appear on the recorded deed, whether the mortgage was properly recorded, etc.), the home could be subject to liquidation in Chapter 7 bankruptcy. In order to fully protect the house and to determine your eligibility for Chapter 7 (which is another matter, entirely), I would strongly advise that you consult with a reputable Chapter 7 bankruptcy attorney near you. If you live in Michigan, give me a call for a free consultation and we can go over everything in greater detail. I hope this information helps.
    Answer Applies to: Michigan
    Replied: 5/13/2011
    The Law Office of Mark J. Markus
    The Law Office of Mark J. Markus | Mark Markus
    Yes, you can surrender your car and be discharged for any deficiency owed after sale. Whether you qualify for Chapter 7 is an extremely complicated analysis way beyond the scope of this service. You need to have a consult with a qualified bankruptcy attorney in your area.
    Answer Applies to: California
    Replied: 5/12/2011
    Carballo Law Offices
    Carballo Law Offices | Tony E. Carballo
    First, you should not listen to people who are not qualified to give you information and advice. Only a bankruptcy lawyer can give you reliable information and advice. You can file for bankruptcy and surrender the car in the bankruptcy petition if you want to get rid of the debt related to the car. The bank will pick it up whenever they get around to it which could be very soon or months later. The car loan and any other loans will be discharged unless the debt is non-dischargeable such as domestic support obligations, student loans and fines. You can qualify for Chapter 7 even if you have equity in your house but you would not want to file a Chapter 7 bankruptcy case unless you can protect the equity in your house. If you cannot protect the equity then your house could be sold to pay your creditors. Therefore, you need to find out how much equity you have and how much you can protect (exempt). That depends on your marital status, age, disability, etc. Talk to a lawyer who specializes in bankruptcy cases. The modification generally has nothing to do with how much equity you have. Equity is the difference between the value of the house (what you could sell it for) less the total owed on it.
    Answer Applies to: California
    Replied: 5/12/2011
    Law Office of L. Paul Zahn
    Law Office of L. Paul Zahn | Paul Zahn
    First, you don't have to surrender the vehicle pre-filing to be able to discharge the debt. Second, a personal loan is dischargeable. Third, whether or not you have equity in a home is not the basis for determining if you qualify for a chapter 7 filing. If you are in my area, please contact me for a free consultation and I will determine if you qualify for chapter 7 filing.
    Answer Applies to: California
    Replied: 5/12/2011
    Indianapolis Bankruptcy Law Office of Eric C. Lewis
    Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
    A loan is secured by the collateral (the car) until the car is sold and the lien extinguished. If there is a deficiency, in many states, the creditor can sue the debtor for the difference. If you have equity in your home that is "non-exempt," filing a Chapter 7 bankruptcy would subject the realty to liquidation, in most cases.
    Answer Applies to: Indiana
    Replied: 5/12/2011
    The Orantes Law Firm
    The Orantes Law Firm | Giovanni Orantes
    It depends. One true statement is that the amount of equity in your house does not determine whether you qualify for bankruptcy relief. However, you should call us for a free initial office consultation at 213-389-4362 to get a response specific to your situation. In general, you are allowed to retain certain amounts of equity in your house and still discharge your unsecured debts, which the loan against your surrendered car would be. The amount of equity you may retain (which is called an "exemption") depends on your age and income, among other things, and ranges from $75,000 to $175,000 under the State of California laws. If the amount of the exemption you are allowed is equal to or the same as your the amount of equity you have in your property, you may still file and would not have to pay anything. If your equity is greater than your exemption, more investigation needs to be done such as, investigating exactly what the value of your property really is as sources such as the internet are usually wrong.
    Answer Applies to: California
    Replied: 5/12/2011
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    Let's go in the opposite order. How much equity do you have in your home? You are only allowed to exempt a certain amount of equity in your home, depending on your state's exemption laws. You'd need to look that up or have an attorney look it up for you. Then, moving onto the car, yes, if they took possession of the car, and you then filed the bankruptcy, the loan on the car would now be unsecured, as the security (which is the car) is already gone. Hope that helps.
    Answer Applies to: California
    Replied: 5/12/2011
    Benson Law Firm
    Benson Law Firm | David Benson
    The car loan remains secured until the collateral is sold. What remains after that would be unsecured and likely dischargeable in a Chapter 7 case. The amount of equity in your home has nothing to do with qualifying to file under Chapter 7. It may, however, affect your decision about filing a 7 or a 13.
    Answer Applies to: Ohio
    Replied: 5/12/2011
    Bankruptcy Law Office of Robert Weed
    Bankruptcy Law Office of Robert Weed | Robert Weed
    As to the car, yes. You explained it right. As to equity in the house, it depends on how much equity, and what state you are in. (And in some states, it would matter whether you had any joint debts with your husband.)
    Answer Applies to: Virginia
    Replied: 5/12/2011
    Uriarte & Wood, Attorneys at Law
    Uriarte & Wood, Attorneys at Law | Robert G. Uriarte
    Answer: Not true. You need to have a lawyer run a means test to see if you qualify for a chapter 7. Next you need to ascertain whether the equity in your residence is protected. If so, you can file and protect your home and discharge the personal obligation for the car you returned. GET IN TO SEE A LAWYER not a paralegal or notary. consults are typically free.
    Answer Applies to: California
    Replied: 5/12/2011
    The Law Offices of Alan M. Laskin
    The Law Offices of Alan M. Laskin | Jared B. Gaynor
    That's really two questions - First, if you have surrendered the collateral for the car loan, then yes, it is now viewed as an unsecured loan, and is fully dischargeable. Second, depending on where you live and the exemptions in Bankruptcy available to you, you may have issues when you have excess equity in your primary residence. You should speak to a local BK attorney and see if what you heard was true, or a misunderstanding on a layman.
    Answer Applies to: California
    Replied: 5/12/2011
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