When
you file for bankruptcy, any vehicle you own is property of your bankruptcy
estate. This means that unless your vehicle is financed or exempt, it may be
taken in bankruptcy if you do not take steps to protect it. The bankruptcy code
provides ways that you may be able to protect your vehicle with your personal
property exemption.

If
your vehicle is financed, you need to figure out if you owe more than the vehicle
is worth. Websites like Kelly Blue Book and NADA can help you understand the value
of your vehicle based on the trim level of the vehicle, the features it has,
and the current mileage. Then, compare the value of your car to your last loan
statement. If you owe more than the value of your car, there is no equity.

  • If you have no equity in the car, you should
    decide if you want to keep the car. Is the payment easy for your to make? How
    high is the interest rate? Decide if you can afford to keep the car or consider
    whether you should surrender it. The bankruptcy surrender process is fairly
    simple – you notify the court of your decision to surrender the car and they
    coordinate a time to come pick up the car, sell it, and deal with paying off
    your creditors.
  • If you have equity in the car, calculate how
    much. If your car is worth $10,000 but you owe $8,500, this means you have
    equity of $1,500.00 in your car.

When
you file for bankruptcy, there is a vehicle exemption of $1,000 that you can
only put towards a car. In our above example, this would lead you with $500.00
of equity ($1,500 equity – $1,000 vehicle exemption) that needs to be
protected.  

When
you file for bankruptcy, you also have a certain dollar amount of personal
property you may exempt. Often times, this personal property exemption is used
to protect things such as your jewelry, your furniture, and your electronics.
The amount of your personal property exemption depends on whether you claim a
homestead exemption and whether you are filing with a spouse.

  • If you file for bankruptcy and are
    claiming a homestead exemption (meaning you own your home and intend on keeping
    it), you will have a personal property exemption of $1,000.
  • If you file for bankruptcy and you do not
    claim a homestead exemption (meaning you rent where you live or your own your
    home but are surrendering it), you will have a personal property exemption of
    $5,000. This is sometimes known as a wildcard exemption.
  • If you are filing bankruptcy together with
    your spouse, these amounts double to $2,000 and $10,000 depending on whether
    you claim a homestead exemption or not.

If
you take your total amount of personal property exemptions and reduce it by the
value of stuff you plan on keeping, such as clothing, jewelry, furniture,
electronics, etc. and you still have money left over, you may be able to put
the rest of your personal property exemption towards protecting your vehicle. In
our example above, if you have $500.00 in personal property exemptions left
over (after exempting all the rest of your stuff), you could use that personal
property exemption towards keeping your vehicle.

If
you go over your exemptions or try to keep more stuff than you have exemptions
for, the Bankruptcy Court provides for two options – a buy back of your vehicle
or a surrender of your vehicle. This is because any amount you go over in your
exemptions is actually equity you have in your personal property. The equity is
an asset of your bankruptcy estate and can be liquidated by your Bankruptcy to
pay back some of your creditors.

  • Buy-back
    – If you go over your exemptions, you may buy-back the overage in your
    exemptions by paying the Bankruptcy Trustee the amount you are over in your
    exemptions. The Bankruptcy Trustee prefers a lump sum payment for the buy-back,
    but in some instances, they are willing to take payments that should not exceed
    more than six months.
  • Surrender
    – If you go over your exemptions and you cannot afford to buy back your equity,
    you will need to surrender an asset in the amount you are over in your
    exemptions. If you are over your exemptions by $3,200, you will need to surrender
    your vehicle if you cannot buy it back.

Meeting
with an experienced bankruptcy attorney can ease your fears and ensure your
paperwork, and most importantly your exemptions, is done correctly. There is no
substitution for the advice an experienced bankruptcy attorney can provide.
Most debtors risk losing their vehicle if they do not have an understanding in
their exemptions and what they can protect. You may find a great value in the
fees you pay for an attorney to handle your paperwork correctly and counsel you
about your exemptions. Contact Feher Law to set up your consultation at
727-359-0367 or Kfeher@FeherLaw.com

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