Keeping your car in bankruptcy is important, especially if it’s a reliable car and you’re looking forward to the day you pay it off. Fortunately, the rules of bankruptcy typically allow for you to keep your vehicle and successfully file a bankruptcy.
Valuing The Car
Your bankruptcy attorney may ask you to take your car to get it appraised at Carmax or another qualified dealer. This will help establish value for the purpose of disclosing information about your car when you file bankruptcy.
You’re trying to determine the equity in the car, which is quite simply the Retail Value minus Existing Loans/Liens. So, if your car has a retail value of $12,000 and you owe $10,000, you have equity of $2,000. This equity is an asset that you own.
Exempting Your Equity
The next step is to use your bankruptcy exemptions to assist you in keeping your car in bankruptcy. The federal rules of bankruptcy give each individual filing a bankruptcy a $3,500 automobile exemption to be used against one vehicle titled in their name. In the case above, there is only $2,000 of equity, so the exemption would more than cover the equity in the asset (vehicle) and the bankruptcy court cannot touch your car in bankruptcy.
Equity Exceeding The Automobile Exemption
If you have equity above and beyond the $3,500 allowed for automobiles, you can use some of your Wild Card Exemption ($5,000 per person) to cover the additional equity in any asset.
Purchasing A New Car Prior To Bankruptcy
Generally speaking, while keeping your car in bankruptcy is an option, you can also trade in your vehicle on another vehicle shortly prior to filing. This may be one way to deal with excess equity and address a vehicle that needs to be replaced. This transaction is considered a transaction you make in the normal course of living and with the proper guidance of a bankruptcy attorney, will not cause you any problem if you file shortly after.
Call A Charlotte Bankruptcy Attorney
If you have any questions I can answer about bankruptcy, assets or bills collectors, please feel free to call me at 704.749.7747. The call is free and I’m here to help.