Can I File Chapter 7 Bankruptcy and Keep a Car?

In Chapter 7 bankruptcy, to keep a car individuals need to ensure that the value of the car is under their state or federal exemption levels. In Chapter 7 bankruptcy, most types of debt are no longer payable. However, assets over exemption levels are confiscated, sold and the proceeds used to repay debtors. If you wish to save a car from bankruptcy liquidation, you will need to understand the process of exemptions.

Bankruptcy Keep Car with Exemptions

The most common way to protect a vehicle in Chapter 7 bankruptcy is through exemptions. In bankruptcy, keep a car by ensuring that the value of the vehicle is under your state’s exemption levels. An exemption is a specific dollar amount of value that laws allow you to keep without allowing these assets to be seized for liquidation during the bankruptcy process. In Ohio, for example, someone filing bankruptcy may keep a motor vehicle valued up to $3225.

There are several stipulations to know about:

• If your vehicle currently has a loan on it, you must reaffirm the loan in order to keep the vehicle. This means that the lender must agree to allow you to continue to make payments, as originally agreed, on the loan.
• The value of the vehicle may be determined by appraisal if necessary. In most cases, the courts will determine the value of the vehicle.
• If you have more than one vehicle, the combined total value must be under this exemption level. Some states only allow consumers to keep one vehicle otherwise.

Also, note that you may be able to apply federal exemptions rather than your state’s exemptions. It is best to do this when the federal exemptions provide you with more protection than your state’s does. The federal exemption for motor vehicles is $3450. To take federal exemptions, you must take all of them, rather than picking and choosing between state and federal exemptions.

Get Legal Help Before Filing Bankruptcy

If you are concerned about the bankruptcy keep car options, it is wise to consult an attorney. A bankruptcy attorney will help to determine what assets you can keep and how to ensure that your bankruptcy documents allow for this to occur. With an attorney’s advice, you may be able to protect more assets and keep your vehicle from being seized. In some cases, it may be necessary to have the vehicle seized by the courts, especially if the value remains higher than the exempt level.