If I File a Chapter 7 Bankruptcy, Can I Keep My Car
Whether or not you can keep your car during the pendency of your bankruptcy case is a very important fact to know about. You definitely don’t want to start your case and find out what your options are when it’s too late.
If you file a Chapter 7, (which is the chapter where all your unsecured debt will be wiped out, such as medical bills, credit cards and signature loans), it will depend on the amount of equity you have in your vehicle. The state you live in determines the amount of equity you are allowed to have and once you know that amount, you will be able to figure out if keeping your car will be allowed.
For example, in the State of Florida, you are allowed to have up to $1,000.00 of equity in your vehicle. If it is determined that this is true in your case, then you will be allowed to keep your vehicle. However, in the case where you go over that amount of equity, you will have two choices. If you want to keep the vehicle, but the amount of equity exceeds the amount allowed, you can pay back the difference to the court.
If you decide you want to pay the court the difference between the equity allowed and the actual equity in the vehicle, usually they will prepare a promissory note that will allow you to make payments on the amount over the next twelve months. They will then sell the vehicle and use any funds collected to divide among the creditors.
However, if you have a car loan with no equity in the vehicle (meaning what you owe is more than the book value on the car), then as long as the payments are current, you may continue to keep the car. In that case, the court would not be able to collect any funds on the vehicle since what the car could be sold for would not be enough to pay what was owed, and therefore, there would be no equity and there would be no advantage to the court to have the vehicle.
Remember that when you file a Chapter 7, your vehicle is not protected like it would be in a Chapter 13. Each Chapter has its’ own set of rules and regulations for you to adhere to concerning your vehicle.  Your vehicle will be treated totally different inside a Chapter 13 case. It is wise not only to know the differences between the two Chapters, but also the outcome of filing each one, so you can choose the Chapter that will be in your best interest for the long term.
Your car is probably one of the largest assets you have, so it will be worth the time and effort you spend finding out how to fully protect it.
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