You may be able file bankruptcy and keep your car if you can protect the equity in it. Exemption laws allow debtors to keep property that the state determines is necessary for them to continue working, up to a certain amount of equity. The value of your car, minus the value of any outstanding loan payments, is its equity. If your state allows exemptions of an equity amount greater than that of your car, you may keep it. If the equity amount does not cover the full value of your car, you will have to work with the trustee overseeing your case to try and keep it. If your car is worth more than what your state exempts, then when the creditors sell your car, they will give you back the equity that was exempt, and distribute the remaining funds to your creditors. If the amount your creditors would receive from selling your car, after all associated sales costs, is too little to be worth the effort, they may decide to abandon your car and let you keep it anyway.How to Declare Bankruptcy and Keep Your Car
Can I Keep My Car if I File Bankruptcy? FAQs
Yes, it is usually possible to keep your car when filing bankruptcy as long as the value of the vehicle is within certain limits and you are current on your payments.
During the course of a bankruptcy case, creditors will be provided with a list of all assets owned by the debtor, which includes vehicles. This information is obtained from documents such as title registrations and loan records.
If the fair market value of your vehicle exceeds the state exemption limit, then you may have to surrender the vehicle. However, you may be able to use an exemption or pay the creditor additional funds to keep the car.
Yes, it is possible to purchase a new vehicle during bankruptcy proceedings. However, you will need to obtain permission from the court in order to do so and you will likely have to provide proof of income and other financial documents in order to receive authorization.
In order to protect your car when filing for bankruptcy, you should make sure that its value does not exceed any state exemption limits and that your payments are current at all times. Additionally, since creditors can access documents such as title registrations and loan records, you should keep these updated to ensure that your assets are accurately reflected in the bankruptcy case.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.