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How To Keep Your Car In A Chapter 7 Bankruptcy Filing

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It is a common misconception that you lose everything when you file for Chapter 7 bankruptcy. This statement is not valid. There are several exempt properties, and although these vary by state, your vehicle may be one of these. Even if your vehicle is not fully exempt, there may be ways to keep it. Here are a few things you need to know about keeping your car after you contact a Chapter 7 bankruptcy attorney. 


A vehicle exemption protects a certain percentage of the equity you have in your vehicle. If the exemption amount in your state meets or exceeds the value of your vehicle, the creditor, through the trustee, cannot take your vehicle.

For example, in North Carolina, you can exempt up to $3,500 in equity from one vehicle as long as you did not purchase it in the 90 before filing for Chapter 7. You may qualify to double this exemption if you and your spouse jointly own the vehicle and are both filing for bankruptcy.

To protect additional equity, you may also use another exemption, called a wildcard exemption, to stack with your vehicle exemption. In North Carolina, the wild card exemption can be worth up to $5,000

Unfortunately, vehicle exemptions vary from state to state. Some states offer much higher exemptions than others. Exemptions are also only available in some states. For example, there is no vehicle exemption in Alabama, but you may be able to use your wildcard exemption to protect your vehicle in this state. 


When submitting a chapter 7 bankruptcy filing, the court will require you to submit the fair market value of any vehicles you own. You can determine this value through Kelley Blue Books or similar online tools. Print off a copy of the site's estimate to include with your paperwork.

Cars quickly depreciate, leaving you owing more on your car than it is worth. When this happens, the best way for you to keep your vehicle may be through redemption. Using this option, you pay the loan company the vehicle's current value and not your current loan amount. 


You may be able to keep your vehicle outside your Chapter 7 filing by reaffirming your payment agreement with your lender. When you reaffirm your loan, you sign an additional agreement outlining your intent to catch up and continue making your payments without discharging the debt through your filing.

Keeping your vehicle during your bankruptcy filing is usually essential for you to continue to work and provide transportation for your family. Unfortunately, it is not always guaranteed. A Chapter 7 bankruptcy attorney can walk you through your best options.

Contact a bankruptcy law firm in your area such as McManus & Associates for more information.