Can I Keep My Automobile If I File for Chapter 7 Bankruptcy? This is also a common question from most of my clients. A debtor can keep the car if the equity in your car is $0 or exempt based on the automobile exemption amount allowed in your state. Your auto may also be exempted using the wildcard exemption amount allowable in your state. The Federal Bankruptcy Code exemption for a car or automobile is $3,450. (To find the exemption amount in your state, see Bankruptcy Exemptions by State) What does this mean?
1. Debtor has a car that is fully paid.
A 1999 Toyota Corolla. Can debtor keep his car? If debtor goes to kelly blue book or some other car valuation site and finds out the private sale value of the car is $3000, he can keep the car because it falls under the exemption of $3,450. Yes!
2. Debtor has a car that is not fully paid.
A 2008 Hyundai Accent. Kelly Blue Book values that car at $5000 but debtor still owes $2000 on the car. Can te debtor keep and protect the car in bankruptcy? Yes! Because the car is worth $5000 but is still owed on $2000, the equity in the car is only $3000. Value - Amount still owing = Equity. Because the equity is under the exemption amount, the auto is protected and kept. Please note, in order to keep the auto, the debtor must continue making regular monthly payments. Some companies require a reaffirmation agreements where the debtor promises to keep making payments during and after bankruptcy.
3. Debtor has a car that is fully paid.
A 2007 Acura Integra. Can debtor keep his car? If debtor goes to kelly blue book or some other car valuation site and finds out the private sale value of the car is $6000, he can NOT keep the car because is more than the exemption of $3225. BUT, some states like California, allow you to use any excess of you wildcard exemption towards your car. The California wildcard exemptions exempts a little more than $20,000 worth of assets. So, in essence if you do not use this wildcard to protect furniture, jewelry, stocks....then in essence, you can use up to $23,000 worth of exemptions to protects 1 or more vehicles.
Get Informed: Learn more about your property in bankruptcy.
Talk to an Attorney
While you can feel free to file bankruptcy on your own, it is not advised because it is a very technical area of law. Once you miss a creditor on your schedules, fail to disclose an asset, or fail to exempt a property you meant to protect, the court will have a good and quick reason to dismiss you case and you would have wasted the amount you paid for you filing fee. Also, if you do not file within 6 months of your credit counseling certificate date, the certificate will expire and you would have pay to retake the course. There are many ways to make mistakes on your petition and this is why it is usually better to hire a competent attorney.