Can I Keep My Car After I File Bankruptcy?

Will You Lose Your Car After Filing Chapter 7 Bankruptcy?   You should be able to keep your car after filing a chapter 7 bankruptcy.  In a nut shell, Chapter 7 Bankruptcy allows debtors to keep all exempt property, such as clothes, tools, retirement funds and cars.  In the Fresno area, most chapter 7 cases result in debtors keeping all of their property because after an analysis, it is all found to be protected with bankruptcy exemptions.  The idea of exemptions is to allow for debtors to get a reasonable fresh start.  In other words, there are limits -- you can keep the Honda, but not the Tesla or Porsche.    Here are the steps to see if you can keep your car: Step 1: If You Sold Your Car, How Much Money Would You Profit?      If you sold your car, how much profit would you make?  If your car is paid off, you will be able keep 100% of the proceeds of the sale of the car.  The profit would be the total amount you sold the car.   

If the car is financed, than the profit would be the money left over after the car lender was paid.  If the car sold for $10,000, and the present loan value was $8,000, than your profit would be $2,000.  If the car is sold for $10,000 and the present loan value is $11,000, there would be no profit ($0.00).  In fact, to make the sale take place, you would have to pay the lender an additional $1000 for the lender to take the lien off of the car.   

Step 2: Apply the Appropriate Exemption Amount.  In California, debtors have two exemption amounts to choose from with regard to cars.  The two choices are based upon whether you will be protecting the equity in your home. In California, you can protect a lot of equity in your home.  (See How Much Money Can I Keep When I File Bankruptcy?)  As a result, exemptions on personal property is greatly reduced.  

If You Have Equity In Home You Are Claiming ExemptIf you have equity in your home, the amount of equity you are allowed to exempt in cars is reduced.  Presently, the car exemption is $2,725.

If You Are Not Protecting Home EquityIf you are not protecting any equity in your home, you can protect more!  Presently the total exemption value for multiple cars is $4,800.

If there is more equity than $4,800, debtors are allowed to use a "wildcard" exemption of approximately $25,000.

Thus, in many cases, filing a chapter 7 bankruptcy will allow debtors to keep their car.

Attorney Ken Jorgensen is located in Clovis, California.  He handles personal, property and business disputes, including bankruptcy and eviction cases.  You can find out more about Ken on Facebook, or at his websites, www.fresnolawgroup.com and www.fresnobankruptcylawgroup.com.  He can be reached at [email protected] or by telephone at 1-559-324-1882.
Photo Credit: Wreck at Flickr