Considering filing for bankruptcy while also contemplating an automobile purchase can be a complex and delicate balancing act. However, there are situations where having access to a vehicle is vital and waiting through the bankruptcy process imposes an additional hardship on you and your family. With careful planning and guidance from an experienced attorney, you can get obtain and keep a car or truck as you approach legal action to relieve your debt issues.
You should remember the following tips if you’re thinking about buying a car prior to a bankruptcy filing:
- Consider how the trustee will react — Bankruptcy trustees pay close attention to major purchases that occur in the months before someone seeks bankruptcy protection. Luxury items often raise red flags, so be cognizant about how particular vehicle might look to an outsider.
- Understand the available exemptions — Georgia law allows a $5,000 vehicle equity exemption for a single filer. This amount is doubled for a car or truck jointly owned by spouses. Wildcard and unused homestead exemptions might add to the total equity you can have in your vehicle while shielding it from a Chapter 7 liquidation. Your attorney can help you by examining your particular circumstances and advising on the specific exemption amount available.
- Evaluate your budget — Assess your financial situation honestly and determine whether purchasing a car aligns with your budget, both before and after filing for bankruptcy. Consider factors such as monthly payments, insurance costs and ongoing maintenance expenses to ensure affordability.
- Compare bankruptcy chapters — The type of bankruptcy you’re considering can influence your decision. In Chapter 7 bankruptcy, non-exempt assets may be liquidated to pay debts owed creditors, in full or in part. This could potentially affect your ability to keep a newly purchased car. In contrast, Chapter 13 bankruptcy establishes a repayment plan that could enable you to retain key assets.
- Be transparent — From the moment you start to consider bankruptcy, transparency is essential. Explain the situation to your bankruptcy attorney who can help you avoid potential complications and accusations of fraud.
- Explore alternatives — Consider alternatives to purchasing a car outright, such as leasing or opting for a more affordable vehicle. Exploring these options can help minimize financial strain and ensure compliance with bankruptcy requirements.
At Jeff Field & Associates, we have six offices to help Georgians with all types of debt-relief concerns, including the effect bankruptcy has on significant purchases before and after filing. Please call 404-381-1278 or contact us online for a free initial consultation.