Can I Keep My Car If I File Chapter 7 Bankruptcy in Pennsylvania?
Filing for bankruptcy can be a frightening proposition if you’re concerned about the future of your personal property. You may be most concerned about whether you’ll be able to keep your car. Skilled bankruptcy attorneys get this question all the time. And as we try to explain it, we discover there are many misunderstandings as to the ways in which Bankruptcy Law protects your car. Call the Pennsylvania Chapter 7 bankruptcy attorneys of Young, Marr & Associates if you are contemplating filing for bankruptcy, and you want to keep your vehicle. We offer free and confidential consultations at this critical juncture of your life. Call us at (215) 607-7478 to schedule a free consultation.
How Does Bankruptcy Protect My Car?
Keeping a car falls well within the concept of the “fresh start” that is a driving force in Bankruptcy Law. Most Americans need their car as a principal means of transportation. For this reason, there are mechanisms known as “exemptions” built into the US Bankruptcy Code that make it possible to protect your car when you file for bankruptcy. Many of our clients have questions about this legal concept known as “exemptions.” If you are considering filing for bankruptcy under Chapter 7, you may be wondering if the process can result in the sale of your car in order to pay other debts. While this is possible, experienced attorneys will work with you to make the exclusion of your car out of the bankruptcy process a priority. When you discharge your debts in bankruptcy, this means you will not be legally obligated to pay them.
Not all debts can be discharged in bankruptcy such as child support, alimony or most tax debt. Due to the need to pay these debts, certain assets are sold to satisfy the non-dischargeable debts. While some assets may be sold, bankruptcy law provides these essential protections called exemptions. With the right legal representation, exemptions provide key advantages, including those that will allow you to keep your car.
What Bankruptcy Exemptions Apply to My Car?
Exemptions are the provisions of the US Bankruptcy code excluding or exempting a certain amount owed out of the bankruptcy process. This means the property will not be liquidated or sold as part of the bankruptcy process. If the exemption analysis is done correctly, then you will not have to lose the qualifying property you own. A skilled Pennsylvania bankruptcy attorney will help you navigate through that part of the process.
When an item is exempt, this usually means that it will not be sold or liquidated as part of the bankruptcy proceedings. Skilled bankruptcy attorneys usually claim exemptions at the outset of the bankruptcy filing. An experienced bankruptcy attorney will be able to give you a heads up on the exemptions and about the repercussions of this analysis in your property interests.
In the case of your car there are three important exemptions:
The Motor Vehicle Exemption
Pursuant to Section 522(d)(2) of the US Bankruptcy Code, debtors can take an exemption in one vehicle for a total “interest’ or value of up to $3,775. To reach a final determination of the exact amount that will be exempt, you will look at the market value of your car, commonly known as the “blue book” value to make the calculation. For example, you will subtract the blue book value amount to the total debt owed, and you can take an exemption up to the $3,775 allowed under the code. If the amount is within limits, your car will not be liquidated under Chapter 7. If the amount is close, an experienced Philadelphia bankruptcy attorney can help you.
The Wild Card Exemption
In addition, Pennsylvania residents have access to a “wildcard” exemption of $300. While it can be applied for any purpose, a lot of people decide to use it to be able to keep their car.
The “Tools of The Trade” Exemption
Pursuant to Section 522(d)(6) of the US Bankruptcy Code, you can seek an additional exemption for your car if it’s considered part of your business or “tool of the trade.” Debtors can exempt up to $2,375 of tools of the trade they or their dependents own. The US Bankruptcy Code allows for these exemptions to overlap with other exemptions. For example, a motor vehicle sometimes can be claimed as exempt so that a car worth about $6,500 could be claimed by combining these sections. When the wild card exemption is added up, you can get $6,450 exempted.
What is “Equity” of the Car Value?
The equity of your car value is essentially the amount you’ve paid off in your car. If your car debt is the car in total, your equity is zero. Determining your equity is a central decision that may seem just a mathematical calculation. However, when viewed in contract to exemptions, the amount of your equity is a central question as to whether car can be kept after filing of Chapter 7.
Car Repossession and Chapter 7 Bankruptcy in Pennsylvania
There are multiple options related to your car when you file for bankruptcy under Chapter 7. You can either exclude the car if you can meet the exemption requirements or seek on the following three options:
- Surrender or give up the car and getting the car’s debt discharged or eliminated.
- Redeem your car by paying the fair market value in a lump sum within 30 days after filing for bankruptcy. There are redemption financing institutions. The fair market value is usually the “blue book” value.
- Reaffirm your debt means you will be obligating yourself to pay the debt. The reaffirmation is just as if you didn’t file bankruptcy, which means your car may be subject to repossession and you may have to continue paying the debt during the pendency of the bankruptcy case.
Pennsylvania Bankruptcy Lawyers Offering Free Consultations
The experienced team of bankruptcy attorneys working at Young Marr & Associates stands ready to assist you. We have offices conveniently located throughout Pennsylvania and New Jersey. To schedule a consultation call (215) 607-7478.
☑ Been paying credit card balances that seem to never go down?
☑ Lost your job and are now having trouble keeping up?
☑ Attempted to work out a payment arrangement to no avail?
☑ Been notified of a mortgage foreclosure action?
☑ Been denied for a mortgage or other line of credit?
If the answer to any of these questions is “yes” then bankruptcy may be an option that you should consider.