Chapter 7 bankruptcy affords debtors the right to discharge unsecured debt such as credit cards or medical bills. To recoup the debts, the bankruptcy trustee might liquidate certain assets to help repay creditors. In most cases, however, the trustee does not find valuable assets to liquidate because the debtor simply does not have any.
When the debtor has a vehicle, the trustee may look at the value of that vehicle as a potential asset that can be liquidated to repay creditors. But if you carefully plan ahead, you may be able to protect your vehicle from liquidation in bankruptcy. In this article, the Dansville, IN, bankruptcy attorney, Chris Arrington, will take a look at how to protect your car from liquidation in Chapter 7.
Wildcard exemptions and your personal vehicle
Every state in the U.S. has its own set of laws regarding bankruptcy. There are also federal laws regarding bankruptcy. In Indiana, you can claim certain exemptions for personal property that would be liquidated during a bankruptcy proceeding. You can use these exemptions to protect equity in your vehicle. Indiana’s wildcard exemption allows you to protect any personal property you choose. This can include a personal vehicle you use to get to and from work. You can exempt up to $12,100 in equity in your vehicle. However, there are no vehicle-specific exemptions under Indiana law.
The wildcard exemption applies to any type of personal property you want to protect. This includes your vehicle. So, if you are interested in protecting your vehicle from liquidation, you can use the wildcard exemption for that purpose.
Assessing your vehicle’s equity
Prior to filing for Chapter 7 bankruptcy, you will need to assess the equity of your car. To do this, you will first need to determine the car’s fair market value. You will need to take into account factors such as its age, condition, and mileage. You can use sources like Kelly Blue Book or consult with a professional appraiser.
You will then need to quantify your outstanding car loan balance. Your equity is the car’s fair market value minus the amount you owe on the loan. When your car is worth more than what you own on the loan, you have equity. You can protect this equity using your Chapter 7 wildcard exemption.
If the equity on your car falls within the exemption limit, then you can protect your car in Chapter 7 by using the wildcard exemption of $12,100. A creditor would not be able to force the sale of the car. If your equity is greater than the wildcard exemption, they might be able to force the sale of the vehicle. However, you still have options, and an experienced bankruptcy lawyer could help.
Talk to a Dansville, IN, Bankruptcy Attorney Today
Chris Arrington represents the interests of Chapter 7 bankruptcy filers in Dansville, IN. Call today to schedule an initial consultation, and we can begin discussing your path to financial recovery immediately.