Blog > 2022 > January > If I File for Bankruptcy, Can I Lose My Car?
A question we hear pretty often at our practice is, “if I File for bankruptcy, can I lose my car ?”
The short answer to this question is no. You will not necessarily lose your car if you file for bankruptcy. However, there are some conditions to consider here. Below, we’ll outline everything you need to know about how to keep your personal mode of transportation while filing for bankruptcy.
Everyone who lives in California knows the importance of having reliable transportation. You need a car to get just about anywhere. So, it makes sense that keeping their mode of transportation is critical for someone filing for bankruptcy. There are a few things to consider here.
First, whether or not the court will consider taking your transportation away will largely depend on the value of your vehicle and whether you have a loan out on it. The court wants to know how much equity you have in the car.
Suppose it is yours outright, and you are not making payments on it. In that case, the vehicle will be considered your asset, and the court may decide to take it away to pay off your lenders. The same goes for if you are currently making payments on your vehicle and you have a lot of equity in it (you’ve already paid off a lot of it). The court may consider the car an asset in this case and may take it away.
If, however, you are still making payments on your car but haven’t paid much of it off yet, it’s not an asset for you, so the court will likely let you keep it. If you are delinquent on your payments, the car will probably be repossessed and back to your lender.
How do you know how much equity you can have in your vehicle while still keeping it? First, figure out what you have invested so far by subtracting your loan balance from the value of your car. Now, compare this amount to the exemption limit for vehicles. If the exemption limit is $5,000, and you’ve already paid $6,000 into your car, you may have to surrender it.
Everyone’s financial situation is different, so sometimes, it can be challenging to know if someone’s car will be repossessed when filing for bankruptcy or not.
Some individuals choose to surrender their vehicle back to the lender as well. This is often done when paying off the loan would be too much of a financial strain moving forward. This doesn’t mean you can’t make arrangements to find a different, more affordable car either. Sometimes, that’s the wisest move.
Not sure whether you’ll be able to keep your car when filing for bankruptcy? Contact SM Law Group, APC for assistance.
Our goal is to help you get on the road to financial recovery. Give us a call today to schedule your free consultation.
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