Read on to learn how motor vehicle (and other) exemptions protect your car, how to determine if your car equity is protected, and additional steps you must take to keep your lender from repossessing your car.
The motor vehicle exemption helps determine whether you can keep your car, truck, motorcycle, van, or other automobiles in Chapter 7 bankruptcy. To determine if you can keep your vehicle in Chapter 7 bankruptcy, you calculate the equity in your car and compare that number to the applicable motor vehicle exemption.
The first step is to figure out how much equity you have in your car if any
Your Equity If You Don’t Have a Car Loan
If you own your car free and clear (that is, you don’t have a car loan), the equity in your car is the car’s replacement value – that is, what you can currently sell your car for given its age and condition. You can find the replacement value (also called market value) of your car on websites such as Kelley Blue Book at www.kbb.com or the National Auto Dealers Association at www.nada.com
Your Equity If You Have a Car Loan
If you have a car loan, your equity in the car is the replacement value of your car minus the amount left on the loan.
If you have zero or negative equity. If you get zero or a negative number, which is not uncommon with car loans, you have no equity. In this situation, the amount of your car exemption is irrelevant, since there is no equity to protect. The trustee will not be able to sell your car. The car loan lender, however, can repossess your car unless you take further action.
If you have positive equity. If you get a positive number, that’s the amount of equity you have in your car. You must compare your equity to any exemption amounts to find out if the trustee can take your car or not.
We will discuss this topic in my next blog posting……
Carolyn Secor is a Clearwater bankruptcy attorney and Clearwater foreclosure attorney serving Palm Harbor, New Port Richey, Oldsmar, Tarpon Springs, Seminole, St. Petersburg, and the Tampa Bay area.