Will I be able to keep my car when I file for bankruptcy? 3 Answers as of August 15, 2010

I’m thinking about filing for Chapter 7, but I can’t do it if they are going to take away my car. I have been financing my car for almost 3 years and have already paid off most of it and I have definitely already paid for its value. Can I keep my car after I file for bankruptcy? I need it to get around and for groceries so I can’t file for bankruptcy if they are going to take it away.

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David Nelson
David Nelson | David Nelson
You have not mentioned a house, I will assume based on that, that you have no house.

As you have not mentioned any other real estate, you probably also have no other real estate.

Occasionally, people will forget that they own a vacant lot in small town in the desert or ignore the baseball card collections or the wife's room full of barbie dolls. Something like that might change the analysis but probably not much.

When you are placing a value on something like a car, most of the time the place to go is the Kelly Blue Book. Go to http://www.kbb.com/used-carsand put your car's information in. We must determine the value of the car, and then subtract the balance on the loan to know the equity of the car. As you are putting in the information, remember you are looking for the "TRADE IN" value of the car.

Bankruptcy trustee's are only interested in the trade in value because if they were able to get the car, they would auction the car, and the best approximation of the auction value is the trade in value. Not that the Bankruptcy trustee will take it, in fact, that's what we're trying to find out.

If you've been paying on it for 3 years, then most of the loan is paid down. Basically if you purchased it for $25,000 and if you're paying on a 5 year loan then you would have paid it down by approximately $15,000 by now and have a principal balance of about $10,000. It probably has a trade in value between $7,000 and $15000 depending on how much you put as a down payment.

In California you're automobile exemption (if you have no equity in real estate) is $3525. You can see that if the value of the car is $15,000 then subtracting the loan would give you an equity of $5000 and $3525 is less. Nevertheless, you would not lose your car in that situation because the Bankruptcy Trustee would still have to pay to you the $3525 if he did take the car, which would only leave him $1475. That's not enough money for him to take. If he can't put together about $4,000 to $5,000 in impounded money from your items of property then he doesn't take anything away from you.

Also in California you're allowed to use your homestead to protect your car if you have no home to apply the homestead to. The homestead is $22,075 which would fix the situation for you even if your car was totally paid off and had no loan at all. The car could have a total value of $22,075 plus $3575, because in California you're allowed to stack the two exemptions together.

If you're not in California but thinking you'd like to move here to file a bankruptcy, then you'd have to live here at least 2 years before you filed your case in order to be able to use California's exemptions, otherwise, they make you use the exemptions from the place that you came from. I call this the O.J. rule because after he was found to not be guilty of murder beyond a reasonable doubt, he was however found to be a wrongful deather in a civil trial. So, he moved to Florida where the homestead was astronomical compared to the rest of the states and waited out the 3 months (all he needed back then) and then he
filed his bankruptcy against Nicole's and Mr. Goldman's families.

It's called forum shopping and it's not allowed except to the folks who arepatient enough to wait out 2 years.

Call to set an appointment to see if Bankruptcy is right for you (sounds like it might be).
Answer Applies to: California
Replied: 8/10/2010
Law Offices of Juan Dotson
Law Offices of Juan Dotson | Juan Dotson
Yes, you can. An attorney will be able to assist you in determining if there is any non-exempt equity in this vehicle and any other personal property you want to keep after filing for bankruptcy.
Answer Applies to: California
Replied: 8/9/2010
Halpern Law Offices
Halpern Law Offices | Daniel B. Halpern
Yes, you should be able to hold on to your car. If you will like to call me about pricing and talk one (1) hour free with me.
Answer Applies to: California
Replied: 8/9/2010
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