What happens to my car if I file Chapter 7 Bankruptcy? A Chapter 7 Bankruptcy is a liquidation of one’s unprotected assets to pay creditors. So it’s a matter of protecting the equity, if any, in your car.
First, how much is your car worth? The value used in Bankruptcy Court is ordinarily the Kelly Blue Book Third Party Value.
Second, do you have an auto loan on the car? How much do you owe on the auto loan? Subtract the auto loan balance from the car value. The resulting figure, if any, is the equity in the car.
Example: Car is worth $11,000. The auto loan balance is $10,000. The resulting equity in the car is $1,000.
2nd Example: Car is worth $11,000. There is no auto loan on the car. The resulting equity in the car is $11,000.
Third, is the car equity within your allowable exemptions? The Florida car exemption is $5,000. Fla. Stat. Ann. § 222.25(1). You may also use the Florida Personal Property exemption on the car. The Personal Property exemption is another $1,000. Fla. Const., Art. X, §4(a)(2). Lastly, you may use the Florida Wildcard exemption provided you did not also use the homestead exemption. The Wildcard exemption is $4,000. Fla. Stat. Ann. § 222.25.
Example: Car is worth $15,000. The auto loan is $10,000. There is no equity in the car after claiming the $5,000 Florida car exemption.
2nd Example: Car is worth $15,000. There is no auto loan. There is $5,000 of equity in the car after claiming the $5,000 Florida car exemption, $1,000 Florida Personal Property exemption, and $4,000 Florida Wildcard exemption.
If there is unprotected equity in the car, then the Bankruptcy Trustee can sell the car. The Trustee will pay you any exemption claimed from the sale proceeds ($10,000 in the 2nd Example above), then she will disburse the rest to creditors less her commission and costs ($5,000 in the 2nd Example above). You may buy back the unprotected equity in the car from the Bankruptcy Trustee. However, the buyback amount must be paid lump sum. In the 2nd Example above, you would have to pay $5,000 lump sum to the Trustee in order to keep the car.
Your transportation is very important. You should contact an experienced bankruptcy attorney if you are considering filing a bankruptcy case. The Law Office of Brent M. Myer, PLLC offers free consultations.
Call today for your free consultation!