What Happens to My Car in Bankruptcy?

What Happens To My Car In Bankruptcy?

What happens to my car in bankruptcy? Will I lose it even if I’m making my car loan payments on time? Or what if I own the car free and clear?”

When you meet with a Licensed Insolvency Trustee for your initial assessment, he’ll determine your vehicle’s fair market value (“FMV”) and the balance you have left on the loan. He’ll also determine if the financial institution that financed the loan (“the secured lender”) has registered a lien against the vehicle as security for that loan.

FMV less than exemption limit

In Ontario, the exemption limit for a personal use vehicle is $6,600. In this case, your Trustee won’t have an interest in your vehicle. However, if there’s a loan against your car, you’ll need to continue making your car loan payments to the secured lender if you want to keep it. If you stop making payments, the secured lender will be in its rights to seize the vehicle.

FMV more than exemption limit, loan greater than FMV

In this case, your vehicle has no equity. “Equity” is the difference between the value of an asset and the amount owing on the loan secured by that asset. If your vehicle has no equity, then the Trustee will have no interest in your vehicle. Again, you will have to continue making your car loan payments to the secured lender if you want to keep the car. If you stop making payments, the secured lender will be in its rights to seize the vehicle.

FMV more than exemption limit, loan less than FMV

In this case, your vehicle has equity. Your Trustee would be required to realize on the equity in the vehicle because it is an asset which must be realized for the benefit of your creditors.

In this case, your Trustee has two options to realize on the vehicle’s equity:

    • Sell the vehicle, pay off the secured lender from the sale proceeds and deposit what’s left over into his trust account for the benefit of your creditors; or
    • Allow you to keep the vehicle, subject to you paying him the equity in the vehicle. You would be in effect “buying out” the Trustee’s legal interest in your vehicle.

For example, if your car had a value of $25,000.00 with $10,000.00 left on your car loan, the Trustee would require you to pay him $8,400.00 in order for you to keep your car – calculated as $25,000 minus the $10,000 loan balance minus the $6,600 exemption limit. In most cases, the Trustee will allow you to pay the $8,400.00 in monthly installment payments. Also keep in mind that in addition to paying the T4rustee, you will need to continue making your car loan payments to the secured lender.

 

If you want to work with a Trustee who will give you confidence and peace of mind that your personal bankruptcy proceedings are being dealt with in a professional manner, look no further.

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Victor and his team (Mary) were always extraordinarily prompt with their responses to any inquiries and went out of their way to respond to questions in detail. They were extremely helpful at all times, even after my Proposal was completed. VIctor is an excellent advocate for his client's needs and

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I searched for a Trustee online and Victor was the only one who really sat down and listened to my issues. He explained to me what is to come in the next five years of my life and thereafter. Mary, his office assistant has been very helpful whenever I have questions. Thank you for helping me.

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Working with Victor Fong was great. We just finished our consumer proposal a week ago and the entire process was quite easy. Mary was amazing at answering all my questions and accommodating me when I had any questions or concerns. Her response time was impeccable. Our initial meeting with Victor wa

 

Contact Fong and Partners Inc., a member in good standing with the Better Business Bureau with an A+ Rating and  one of the 3 Best Rated Trustees in the Greater Toronto Area.

Phone: 416-260-3264

Email:   help@startingovertoronto.com