The reason that bankruptcy protection exists is to stop you from losing all your property when you apply for debt relief. Bankruptcy protection is what happens when you file a case in bankruptcy court; the court discharges your eligible debts in exchange for you paying a settlement amount, which is what happens in a Chapter 13 bankruptcy case or consenting to the court liquidating assets of yours in order to settle your debts, which is what happens in a Chapter 7 case. The court does not liquidate necessities; the assets you need are exempt from liquidation.
Many applicants who file under Chapter 7 can complete their cases and discharge their eligible debts without losing any of their assets to liquidation. In California, cars are a necessity. Whether you are working, retired, unable to work because of ill health or family caregiving obligations, or attempting to return to the workforce after a period of absence, it is almost impossible to get where you need to go without a car. Therefore, before you file for bankruptcy protection, you should figure out which changes, if any, you must make so that the bankruptcy court does not liquidate your car. To help understand Chapter 7 liquidation exemptions, contact an Oakland Chapter 7 bankruptcy lawyer.
Can You Keep Your Car When You File for Chapter 7 Bankruptcy?
Whether your car is exempt from liquidation in a Chapter 7 bankruptcy case depends on the value of your car and whether you own the car outright. If your car is no longer encumbered by a car loan, then it is exempt from liquidation if its value is less than or equal to $7,500. To put this in perspective, consider that cars depreciate quickly; your high school economics teacher probably told you that your car loses half its value as soon as you drive it off the dealership lot. In other words, if you have had your car for so long that you have paid off the loan, its value is probably less than $7,500. If you had been able to afford a car that would still be worth more after so many years, you probably would not be filing for Chapter 7 bankruptcy.
If you still owe money on your car loan, then the exemption is based on the amount of equity you own in the car. If you have $7,500 or less in equity in your car, you can keep it during and after your Chapter 7 case.
What Happens to Your Car in a Chapter 13 Bankruptcy Case?
The safest bet for keeping your car after you file for bankruptcy is to file under Chapter 13 instead of Chapter 7. Chapter 13 bankruptcy cases do not involve the liquidation of assets. The only obstacle is that you need a high enough income to keep up with the payment plan.
Contact the Law Office of Melanie Tavare About Keeping Your Car in Bankruptcy
A debt relief lawyer can help you file for bankruptcy without risking your car. Contact the Law Office of Melanie Tavare in Oakland, California, or call (510)255-4646 for a case evaluation.
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