Can we keep both cars with negative equity if we file Chapter 7 bankcuptcy? 2 Answers as of August 13, 2010

My family is doing a short sale. We will no longer be liable for 2 mortgages, but the 3rd is $90K, with a bank that has a history of being hard to negotiate with (they may only settle for 80% of the outstanding balance which is $72K). We lost about 30-40% of our income, therefore we did the short sale. We are seriously contemplating bankruptcy, but are hesitant if it means losing both cars. We already consulted with one bankruptcy attorney and she indicated we would only be able to keep 1 car. I looked on the Kelley Blue Book site ( and essentially we have negative equity in both cars using the Trade-In value. We would really just prefer to keep the cars and keep paying them even with bankruptcy. Is that possible? We are current on everything and both have a FICO score of >750.

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David Nelson
David Nelson | David Nelson
If you sign the note for the 3rd at $72,000 and then file a bankruptcy, you can discharge that note with the bankruptcy. The best part is that the creditor has to take the hit. Already the creditor knows your financial situation and will not be able to say that you cheated them when you signed the promissory note for the $72,000 because they cannot reasonably say that they could in fact put any value in that promise when they already know you are doing a short sale.

YES, YOU CAN KEEP BOTH CARS, so long as you do not have a 3rd car that runs and is paid for, I cannot think why the other attorney said that you could not. I have been doing this for 15 years. What I keep coming across is a lot of NEW guys on the block who were doing something else and saw bankruptcy as a way to make a quick buck because what they were doing before as a lawyer is not working. Divorce attorneys are diving in like white on rice. Would you go to your best friends cardiologist to fix your herniated disk?

The 2nd car with a loan might be a problem if that car is what appears to make you pass the means test when at the same time you have a 3rd car that is in perfectly fine running condition and that 3rd car is paid for and especially if the 3rd car gets better mileage or is a better brand.

A 2nd car might be considered a luxury item if it is what is helping you pass the means test and it is a luxury car even if there is no 3rd car.

The question in my mind, how well did you pass your means test, sounds to me like the other attorney did not even mention that to you though, so I am sure you do not know the answer.
Answer Applies to: California
Replied: 8/13/2010
Diefer Law Group, P.C.
Diefer Law Group, P.C. | Abel Fernandez
Yes it is possible for you to hold on to your cars, if you want. For more information, please call me.
Answer Applies to: California
Replied: 8/12/2010
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