Making the decision to declare bankruptcy is never an easy one, as there are many factors involved, including which assets you can keep once the process begins. You may worry about losing the things most valuable to you, such as your vehicle.
Experian notes that a Chapter 7 bankruptcy liquidates your assets to pay off your creditors; however, there are several exceptions for vehicles that may allow you to keep your car, even if you decide to proceed with the liquidation.
Chapter 7 bankruptcy vehicle rules
When you file for Chapter 7 bankruptcy, the local courts compile a list of your current assets, including any value you hold in your vehicle. There are several conditions that may allow you to keep your car, including:
- Local exempt equity laws
- The market value of the vehicle when compared to the exemption amount
- Your status regarding payments
You can calculate your vehicle’s equity by subtracting what you currently owe from the car’s value. An exemption is more likely if you are nearing the end of your loan, as your car’s value tends to depreciate each year.
Other Chapter 7 options for your vehicle
If your financial issues have you behind on your car payments, you may lose the vehicle during a Chapter 7 bankruptcy. You still have a few other options, though, such as paying off the loan completely. If this is not possible, the holder of the loan may allow you a discount on the total amount owed, which may help you pay the vehicle off and keep it as you proceed with the bankruptcy.
The trustee of your bankruptcy may have other options for you if you want to keep your vehicle. Local laws and the value of your car will likely determine these possibilities.