Can you file for a chapter 7 bankruptcy and keep your car?
Can you file for a chapter 7 bankruptcy and keep your car?
By: Laura Ferret, Esq.
October 27, 2020
Previously, attorney Jose Parra, discussed one of the most commonly asked questions by those who are considering bankruptcy with his blog on how homeowners can file for bankruptcy and protect their homes. Today, we will discuss what is probably the second most common concern among potential chapter 7 bankruptcy petitioners —whether they can keep their cars after filing for bankruptcy. For a majority of individuals, owning a car is an absolute necessity for completing essential tasks like getting to work, going to the grocery store, and transporting children to and from school and other activities. Fortunately, there are options available for those who are considering chapter 7 bankruptcy but want to keep their car.
As we have discussed previously, In a Chapter 7 bankruptcy, all property owned by the debtor that is non-exempt under the law will be liquidated and paid to the creditors, and all debt that is dischargeable under the law will be discharged so that the debtor doesn’t have to pay it back. California debtors can choose from two different sets of bankruptcy exemptions, found in California Code of Civil Procedure section 703 and 704, respectively. Debtors can elect which set of exemptions to file under depending on which is a better fit for their particular situation.
California’s 703 bankruptcy exemption allows a debtor to file the following exemptions for vehicles in a Chapter 7 bankruptcy: A $4,800 exemption for the equity held in one or more personal vehicles, a $7,175 exemption for a vehicle used as a tool of a trade or business. (CCP 703.140).
Under the 704 exemptions, the following exemptions for vehicles may be available: a $2,300 motor vehicle exemption in any equity held in a personal vehicle, a $6,075 exemption for equity in a commercial vehicle or a vehicle that is used by the debtor or their spouse in a business, trade, or profession earning a living. (CCP 704.010; 704.060).
Assuming the equity in the vehicle is less than the above amounts, debtors can use these exemptions to protect their vehicles from being liquidated and paid to the creditors. Chapter 7 debtors who haven’t yet paid their cars off have additional options. For example, a debtor who can afford to continue making the monthly payments can seek lender and court approval to reaffirm their vehicle loan to avoid the discharge of the debt and a subsequent repossession of the vehicle.
As always, a debtor should put careful consideration and planning into a decision to file for bankruptcy. The attorneys at BPE Law Group, P.C. are more than capable to assist debtors with determining which exemptions may apply to their particular situation.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
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Can you file for a chapter 7 bankruptcy and keep your car?
By: Laura Ferret, Esq.
October 27, 2020
Previously, attorney Jose Parra, discussed one of the most commonly asked questions by those who are considering bankruptcy with his blog on how homeowners can file for bankruptcy and protect their homes. Today, we will discuss what is probably the second most common concern among potential chapter 7 bankruptcy petitioners —whether they can keep their cars after filing for bankruptcy. For a majority of individuals, owning a car is an absolute necessity for completing essential tasks like getting to work, going to the grocery store, and transporting children to and from school and other activities. Fortunately, there are options available for those who are considering chapter 7 bankruptcy but want to keep their car.
As we have discussed previously, In a Chapter 7 bankruptcy, all property owned by the debtor that is non-exempt under the law will be liquidated and paid to the creditors, and all debt that is dischargeable under the law will be discharged so that the debtor doesn’t have to pay it back. California debtors can choose from two different sets of bankruptcy exemptions, found in California Code of Civil Procedure section 703 and 704, respectively. Debtors can elect which set of exemptions to file under depending on which is a better fit for their particular situation.
California’s 703 bankruptcy exemption allows a debtor to file the following exemptions for vehicles in a Chapter 7 bankruptcy: A $4,800 exemption for the equity held in one or more personal vehicles, a $7,175 exemption for a vehicle used as a tool of a trade or business. (CCP 703.140).
Under the 704 exemptions, the following exemptions for vehicles may be available: a $2,300 motor vehicle exemption in any equity held in a personal vehicle, a $6,075 exemption for equity in a commercial vehicle or a vehicle that is used by the debtor or their spouse in a business, trade, or profession earning a living. (CCP 704.010; 704.060).
Assuming the equity in the vehicle is less than the above amounts, debtors can use these exemptions to protect their vehicles from being liquidated and paid to the creditors. Chapter 7 debtors who haven’t yet paid their cars off have additional options. For example, a debtor who can afford to continue making the monthly payments can seek lender and court approval to reaffirm their vehicle loan to avoid the discharge of the debt and a subsequent repossession of the vehicle.
As always, a debtor should put careful consideration and planning into a decision to file for bankruptcy. The attorneys at BPE Law Group, P.C. are more than capable to assist debtors with determining which exemptions may apply to their particular situation.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
Recent and Popular Articles From Our Blog:
- March 30 – The CARES Act Stimulus Package Guidance
- April 23 – Pending Legislation in the Wake of COVID-19
- April 28 – A New Reality – Temporary or Permanent – Virtual Showings and Disclosures
- May 12 – Executive Order Creates Worker’s Comp Liability for Small Business
- May 18 – Planning for Bankruptcy
- May 22 – Servant Leadership
- June 8 – Paycheck Protection Program Flexibility Act is Enacted
- June 10 – Impact to Credit Score After Filing Chapter 7 Bankruptcy
- June 26 – SBA Rolls Out Updated PPP Loan Forgiveness Application
- July 2 – Understanding the Home Equity Sales Contract Act 2020
- July 14 – Governor Rolls Back Re-Opening