Are you wondering what will happen to your car if you file bankruptcy? If this situation concerns you, here’s an explanation regarding what happens to your vehicle when you file bankruptcy.
Are you wondering what will happen to your car if you file bankruptcy? If this situation concerns you, here’s an explanation regarding what happens to your vehicle when you file bankruptcy.Each year hundreds of thousands of households file for bankruptcy in the United States. Even though the rate has dipped in 2019 and 2020, you may be wondering what lies ahead.
You probably know that filing for bankruptcy means that you’re going to forfeit some of your assets, but which ones? Will a bankruptcy leave you homeless and shirtless, even carless?
If you’re asking the question: Can I keep my car if I file bankruptcy? It’s time to read on for everything you need to know.
Can I Keep My Car if I File Bankruptcy
In a word, yes. In many cases, you can keep your car if you file for bankruptcy. But, as with so many things law-related, there are plenty of caveats, so it’s important to understand a few critical aspects of bankruptcy proceedings.
First, you need to understand that, just because you file for bankruptcy, a moving van won’t just show up the next day and take all your stuff–and a tow truck won’t be there to snatch up your one-and-only vehicle. Bankruptcy law allows you to keep some of your assets.
Non-Exempt Assets
When you file a bankruptcy petition, you are essentially proclaiming that you have debt you are unable to pay. Bankruptcy law is there to help you wipe your slate clean of debt, but that doesn’t mean you’re off the hook completely.
Your creditors still have a right to what they’re owed, and they can lay claim to some of what’s sitting in your garage. Here are the types of possessions that won’t get protection following a bankruptcy claim, also known as “non-exempt” assets.
- Expensive jewelry
- Expensive clothing
- Valuable artwork
- Valuable collections, such as a stamp or coin collection
- Expensive musical instruments you don’t need to make a living
- A home that’s not your primary home, such as a rental or vacation property
- A second car or a newer model car in which you have equity
- Boats, motorcycle, or recreational vehicles
- Cash, savings, or assets such as stock options that aren’t retirement accounts
When you think of non-exempt assets, think luxury or otherwise unnecessary possessions of value.
Remember that just because an item is exempt, that doesn’t necessarily mean it will get seized. “Non-exempt” means that certain possessions are fair game when it comes time to settle your outstanding debt.
Exempt Assets
The law grants protection for certain assets, which are known as “exempt” assets. As a debtor, you can usually keep your most essential possessions when settling a debt.
First and foremost, if you’re wondering how to keep your car when filing for bankruptcy, you should know that your car falls under “exempt” status when it comes to assets than could be seized.
As long as the car in question is your primary vehicle, and as long as it is up to a certain value, you can generally keep it, even after filing for bankruptcy.
As mentioned above, if it’s a second or third car the law will consider it outside of exempt status, so they’ll likely be used to settle up some of what you owe. Even a primary vehicle with considerable value, such as a new luxury sedan like a BMW, can sometimes be classified as non-exempt.
Other exempt assets include:
- Necessary clothing
- Necessary household goods and furnishings
- Home appliances
- Pensions or retirement accounts
- Public assistance, such as unemployment
- Jewelry up to a certain value
- A portion of equity of a debtor’s home
When you think of exempt assets, think of more necessary possessions, not unnecessary luxuries like vacation homes or jet skis.
Another important exempt asset worth mentioning is a house, particularly if that house is your primary residence. Whether you file a Chapter 7 or a Chapter 13 bankruptcy, you receive automatic protection from being thrown out of your home.
The immediate protection is called an “automatic stay,” and it prevents most forms of credit collection, such as repossessions, evictions, collection calls, and foreclosures.
In fact, many people facing foreclosure can buy a significant amount of time if they file for bankruptcy. For Chapter 7, you can get relief. This is only a temporary status because the stay on foreclosure will only last as long as your bankruptcy case is pending.
A Chapter 13 bankruptcy will offer more long-term protection for your house as well as some of your other assets. A Chapter 13 bankruptcy will disperse out what you owe in the form of a repayment schedule that can last several years.
How a Lawyer Can Help
If you’re facing a bankruptcy case, it’s important to have the right legal help. While it is, technically, possible to file for bankruptcy on your own, or “pro se,” a lawyer can provide much-needed guidance.
A bankruptcy lawyer can provide valuable advice regarding:
- Which type of bankruptcy is best for you, Chapter 7 or Chapter 13
- Which assets are exempt or non-exempt
- Your rights when you’re filing for bankruptcy during a foreclosure
- The bankruptcy process and procedures
- Tax advice related to your case
- Future implications of your decision to file for bankruptcy
Additionally, a bankruptcy lawyer will file all the necessary paperwork for you, which can be overwhelming for most people. Whether you are considering bankruptcy or about to take action, you will need proper representation to understand all of your rights and responsibilities throughout the process.
The team at Husker Law is seasoned in bankruptcy law, as well as family and divorce law. If you are in the Nebraska area, our lawyers can advocate for you, whether you are filing for bankruptcy or facing a complicated divorce or child custody battle.
While we specialize in certain law areas, we can also provide assistance with clearing criminal records, estate law, aviation law, and business formation.
Contact Us Today
Each year millions of Americans face tough economic circumstances. In certain instances, bankruptcy can give you a much-needed fresh start. We can help you navigate the process. Call Husker Law at (402) 415-2525 today!