One of the most common concerns when considering bankruptcy is whether you can file and keep your car. While Buffalo has public transportation options, most people in Buffalo and the surrounding areas are dependent on a personal vehicle. The good news is that almost all bankruptcy filers can retain their vehicle in bankruptcy.
In a Chapter 7 bankruptcy, we first determine the amount of equity in the vehicle (value minus amount owed). Next, we determine whether that equity can be protected by exemptions, which are bankruptcy laws that allow filers to keep their property. There is an exemption specifically for vehicles. If that exemption cannot protect all of the equity, then in many cases we can also turn to what is known as a “wildcard” exemption, which can be used on any type of property, including vehicles. The result is that a vehicle can be protected for the vast majority of Chapter 7 bankruptcy filers.
Chapter 13 filers can keep a vehicle as well. The Chapter 13 repayment plan will provide for the payment in full of the vehicle loan (if any). There can be an issue if the vehicle loan balance is very high, as the court may then treat the vehicle as a “luxury” asset. Usually this hurdle can be resolved by contributing additional funds into the repayment plan, ensuring that the other creditors aren’t affected.
Filers with a leased vehicle can also choose to keep the vehicle and continue payments.
If you are considering bankruptcy but are concerned about keeping your vehicle, contact me for an evaluation.