Blog post default


Harris-Courage & Grady, PLLC April 16, 2015

The Short Answer Is Probably Not.

Creditors who have judgments can take your car to pay for their claim. When you file bankruptcy, you actually protect your car from these creditors, because once you file, they can no longer use this collection technique.

Before We Can Determine if Your Car Will Be Safe, We Need to Consider a Few Things:

First, do you owe money on your car and, if so, how much?

YES, I Have a Car Loan.

Are you current on your payments?

If you have a car loan, you must make the payments to keep your car. Some clients think that bankruptcy gives them a free car, but it does not. If you don’t make the payments, the creditor has the right and will repossess your car.

If you are not current on your payments and you file a Chapter 7 bankruptcy, the car lender will repossess your car. It is important to get current, especially before you file and after you file a bankruptcy. If you are behind on your car payments, we can catch you up in a Chapter 13 bankruptcy.

Next up:

How much is the car worth?

Since you have a car loan, the court may require that we use the dealer valuation or we may be required to get a valuation of your particular vehicle by an expert.

NO, I Own My Car Free and Clear.

Great; we can likely use a “private party” or “trade-in” valuation.

In both cases, we subtract out the amount you owe on the vehicle to determine your equity in the car. For example, if the car is worth $10,000 and you owe $4,000, the equity is $6,000.

So we have the car’s equity. But there’s more:

The Next Thing We Need to Know Is the Value of Your Home and The Amounts of Mortgage(s) Against It.

You may be wondering why we need to know the value of your home to determine whether we will have an issue with your car.

The reason is this:

In New York State, Individuals Filing Bankruptcy Can Choose New York State Exemptions or Federal Exemptions.

There are big differences between them:

New York State Exemptions

We can protect $75,000 worth of equity in a home for each bankruptcy client.

So if a husband and wife own a home together, they can protect up to $150,000 worth of equity in their home.

Great news, right?

However, the exemption for a car in New York State is only $4,000.

So in our example with $6,000 of equity in the car, if the person filing bankruptcy must use New York State exemptions, we may have a problem protecting the car in a bankruptcy.

Maybe taking the federal exemptions would be better?

It depends.

Federal Exemptions

We can only protect $22,000 worth of equity in a home for each debtor.

But if you don’t own a home or don’t have much equity in your home, we can use that same $22,000 federal exemption to protect your car or other assets.

You Don’t Need Us to Know that Bankruptcy Law Is Confusing.

But you don’t need to do this analysis yourself.

Laura Courage, an experienced bankruptcy lawyer, can do it all for you. We will help you protect your assets, including your car, by walking you through the entire process. Call today.