Can I Keep My Car During Bankruptcy?

Bankruptcy is a big step to take, and it's completely normal to wonder how making this decision will impact or change your life.

One of the questions that is regularly asked during the bankruptcy process is: can my vehicle be repossessed if I declare bankruptcy? The answer to this question is simple enough if you live in Florida - if you want to keep your car, you will have to pay for it. If you do not live in Florida, the answer to this question depends on a number of different criteria (keeping in mind that each state is different).

The following information regarding this topic may be of help to you, but it's best to contact a qualified consumer bankruptcy attorney in order to go over your specific case prior to declaring bankruptcy.

The Value of Your Vehicle

What is the current value of your vehicle? This is the first thing that a Bankruptcy Trustee or Judge will likely ask. While you may have some idea of the worth of your vehicle, you will need to have your car or truck appraised professionally.

To do this, you will have to bring your vehicle to someone that is legally qualified to sell vehicles (this person cannot be a family member or friend), so that you can obtain an appraisal that can be shown to the Bankruptcy Trustee and/or Judge.

Typically, the creditor will hire a professional appraiser, and in Florida appraisals always begin with the retail value and work towards the proper value (based on wear and tear).

Vehicle Ownership

You may also have to prove that you have a clear title to your vehicle. A clear title means that there are no debts attached to your vehicle (in other words, you have not used your vehicle as a type of debt security). Here's where declaring bankruptcy and keeping your vehicle gets a bit tricky (and why you need a lawyer to sort things out!). If you have a clear title, a qualified attorney can explain your state's exemptions to you to determine if you have any non-exempt equity in the vehicle.

If you have a "lien" (have used your vehicle as a debt security) on your vehicle, the company that you are currently making payments to may have a right to claim your vehicle if you cannot continue to make those payments. This is where it is important to know (before you file bankruptcy) what your intentions are with regard to the vehicle. If you want to keep it, you have the right to do so, as long as you keep making the monthly payments. (keeping in mind that each state interprets this a bit differently)

In other words, if you promised "Company A" that they could seize your car, so that you could take out a loan amount, that company might have claim to your vehicle if you can no longer pay off your debt. In some cases, you can negotiate with a company if you still owe a debt that you cannot pay. If you can no longer pay what you owe, you may not be able to keep your vehicle through bankruptcy.

Before filing for bankruptcy, your attorney should know exactly what you want to do with each and every item of personal property that you either intend to keep or surrender.

Getting the Help You Need

There are a lot of details and specifics that have to be worked out in order to determine if bankruptcy is the right choice for you. As you can see from the information listed above, nothing about filing for bankruptcy is cut and dry, and every case is unique.