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Secured Car Loans

I currently have 2 secured car loans in my name.

1. $5000, 0% interest, 2 years left
2. $50,000, 4% interest, 8 years left

If I go bankrupt, am I able to keep car loan #1 by making the payments and having the 2nd voluntarily repossessed?


Posted from: Ontario

One Response to “Secured Car Loans”

Doug Stuive, CA | Trustee | CIRP said...

Yes. When you file for bankruptcy you often have the option of returning your vehicle to the secured creditor and including any amount owing after dispose of your car in your bankruptcy. The bankruptcy gives you the opportunity to assess whether you can afford to keep your vehicle loan payments with your current budget or whether you wish to walk away from the loan. In your case, with the amount owing on your second car loan it seems to make sense to maintain the first loan and to walk away from the second vehicle loan. However there are some items to consider before you make a final decision regarding which vehicle to keep and which one to give back. For example, the Trustee will have to determine if there is any equity in your vehicle loan. This means that the trustee will obtain a valuation for your vehicle and will compare that value to the amount owing on your car loan. If your car is worth more than what you owe than this equity is an asset of the bankruptcy estate. Determining if your car loan has any equity may affect your decision moving forward in terms of what you are going to do with your secured loans. To make sure you are making the right decision consult with a licensed trustee.