Thankfully, you can almost always keep your car if you want to. But whether keeping your car is a wise decision depends on your financial situation. There are three primary options available: surrender, reaffirmation, and redemption.

Surrender

Surrendering your car means voluntarily giving it back to the lender. By surrendering the vehicle, you discharge the debt associated with it, freeing you from future payments and liability for any remaining loan balance. This option is often chosen if someone wants to get rid of their car.

Reaffirmation

Reaffirmation involves entering into a new agreement with your lender to continue paying the car loan despite filing for bankruptcy. This means you agree to keep the car and continue making payments under the same or possibly modified terms. Reaffirming the debt removes it from the bankruptcy discharge, making you personally liable for the loan as if you had never filed for bankruptcy. This option can help you maintain possession of the car and potentially rebuild your credit, provided you can afford the ongoing payments.

Redemption

Redemption allows you to keep your car by paying the lesser amount of either: 1) the fair market value of the car; or 2) the amount owed on the car loan. Understandably, most people don’t have enough cash available to make this lump sum payment.

Thankfully, several lenders specialize in redemption financing. This means you might be able to refinance your car loan at a lower interest rate. Alternatively, if your car is worth less than your loan balance, you can get a new loan with a lower principal balance.

If you want to keep your car when filing for bankruptcy, attorney Ross Johnson can help. For a free consultation, call (415) 234-0361 or reach out online.

Put yourself in the shoes of a lender for a minute. You would be ecstatic to lend to someone who just discharged all of their previous debt in bankruptcy.

Some lenders monitor bankruptcy filings, and automatically send marketing material to anyone that files. Of course, these lenders will probably charge a higher interest rate. But they figure they'll probably be paid back, since someone who just filed for bankruptcy now owes significantly less money than they did pre-bankruptcy.

Chapter 7 filers can be approved for FHA and VA mortgages as soon as two years after bankruptcy. For Chapter 13 filers, it's can be as little as one year.

If you have questions about qualifying for new credit after filing for bankruptcy, attorney Ross Johnson can help. For a free consultation, call (415) 234-0361 or reach out online.

When filing for bankruptcy, California law allows residents to keep some (or in many cases, all) of their assets. This makes it easier to restart financially and continue living as productive members of society once the bankruptcy case has concluded.

California allows residents to pick between one of two exemption systems: System 1 (703 exemptions) and System 2 (704 exemptions). Each system lists specific assets you are allowed to keep after filing for bankruptcy. Each system is discussed in more detail below:

System 1 (703 Exemptions)

System 1 (703 Exemptions) includes a $30,825 “wildcard exemption” that can be applied to any property. System 1 exemptions also allow debtors to keep the following:

• $7,500 of equity in a car, truck, motorcycle, or other vehicle. CCP § 703.140(b)(2)

• $800 per item of household furnishings, appliances, clothing, books, or pets. CCP § 703.140(b)(3)

• $1,900 of equity in jewelry. CCP § 703.140(b)(4).

• $9,525 of equity in tools or books used for the debtor’s trade. CCP § 703.140(b)(6).

• Any professionally prescribed health aids for the debtor, the debtor’s spouse, or a dependent of the debtor. CCP § 703.140(b)(9).
  

System 2 (704 Exemptions)

System 2 (704 exemptions) is sometimes called the “homeowners exemption”. This is because it allows filers to keep up to $697,700* of equity in their home. System 2 exemptions also allow debtors to keep the following:

• $7,500 of equity in a car, truck, motorcycle, or other vehicle. CCP § 704.010.

• Any household furniture, appliances, clothes, and other personal items that are used by the debtor and the debtor’s family. CCP § 704.020(a)(1).

• $8,725 of equity in jewelry, heirlooms, and artwork. CCP § 704.040.

• Any health aids that are necessary to enable the debtor or the spouse or a dependent of the debtor to work or sustain health. CCP § 704.050.

• $8,725 of equity in tools, uniforms, books, or equipment that are necessary for the debtor’s trade, business, or profession. CCP § 704.060.

• $1,750 cash in a bank account if receiving public benefit payments. CCP § 704.080(b)(1).

• $3,500 cash in a bank account if receiving social security payments. CCP § 704.080(b)(2).

• Any money received from public retirement benefits. CCP § 704.110.

• Any money received for alimony, support, and separate maintenance, to the extent reasonably necessary for the support of the debtor and the debtor’s dependents. CCP § 704.111.

• Private retirement plans, including IRAs and 401(k)s. CCP § 704.115.

• Workers compensation. CCP § 704.160.

Attorney Ross Johnson can help determine which set of exemptions is best for your situation. For a free consultation, call (415) 234-0361 or reach out online.

Absolutely. The moment your bankruptcy petition is filed with the court, an “automatic stay” is immediately triggered. This powerful legal tool puts an immediate stop to all collection activities. Creditors are legally required to halt their efforts to collect what you owe, which means no more harassing phone calls, threatening letters, or attempts to repossess your property.

If a creditor has already taken legal action against you, like suing you for unpaid bills, that lawsuit must be paused. Eviction proceedings, wage garnishments, and other collection actions are also frozen. The automatic stay essentially freezes everything in place. If a creditor continues to contact you after they received notice of the automatic stay, they're in contempt of court and risk fines or imprisonment.

In simple terms, the automatic stay is the bankruptcy court's way of ensuring that you are protected from creditor harassment while it administers the bankruptcy case.

No! According to the IRS, "Debts discharged through bankruptcy are not considered taxable income." This is an important relief for individuals going through bankruptcy - they don't need to worry about facing a larger tax bill after their debts are discharged in bankruptcy.

On the other hand, the IRS notes if you borrow money from a commercial lender and the lender later cancels or forgives the debt outside of bankruptcy, you may have to include the canceled amount in income for tax purposes. This means that bankruptcy has some tax advantages compared to directly negotiating debt reduction with your lender.

If you have more questions about the tax implications of filing for bankruptcy, attorney Ross Johnson can help. For a free consultation, call (415) 234-0361 or reach out online.