In Southern California, our automobiles are considered to be an important part of our lives. Whether you live in sunny Orange County or Riverside County, our cars are our best friends. Cars provide transportation to work and can also play the role of an air conditioning station through the hot summer days. No one wants to be without our cars in Socal. So, it is important for us to address the question: Can you keep your car if you are filing for bankruptcy?
In most cases, you will be able to keep your car. It does depend on your automobile’s equity and liability though. You cannot expect to have a fully paid Ferrari valued at $250,000 to be overlooked by a bankruptcy trustee, but we can go over a more realistic scenario. Let’s say you put down $3,000 on a $30,000 automobile that you will be using as an everyday driver. Your debt left over is about $27,000 plus financing costs. So, you may have bills over the next 5 years to pay off the debt. Once you drive the car off the lot, it probably loses thousands in value. So, current market value of your car is $25,000, but you still owe $27,000 plus financing costs on the car. Now, the equity value of the car is -$2000. You’ve lost the $3000 that you put down on the car and you are negative about $2000 since the value of the car has gone down.
In the situation described above, there is no equitable value in the automobile. Let’s explore what that means. If a bankruptcy trustee looks at the automobile as an asset, the trustee will note that the car is worth $25k but the outstanding loan amount is $27k. So, if the trustee were to seize the asset and sell it at auction, it may be sold for $20k at auction value and the trustee would have to pay of $27k in loans on the car! The trustee would lose money in that transaction! So, why would the trustee want to take the vehicle in a bankruptcy negotiation? The fact is that the bankruptcy trustee would never want your automobile if you were in this situation or anything similar. Even if you had some positive value in your automobile, it is possible to exempt auto equity by using an automotive exemption allowance or a “wild-card” exemption allowance as specified in the bankruptcy code.
The car you drive can be yours forever if you work with a bankruptcy law firm and attorney who knows how to manage your assets through a bankruptcy. Either way, any activities that may occur with your assets in a bankruptcy should be predictable and fairly obvious if you are working with a bankruptcy attorney who knows what they are doing and has excellent experience with asset management within a bankruptcy.
To schedule an appointment with our Orange County bankruptcy attorneys or Riverside bankruptcy attorneys, you can contact Bankruptcy Law Professionals at (855) 257-7671. We are available for in-person or phone consultations. We look forward to hearing from you.
