I Can Only Keep One Car If I File Bankruptcy, Right?

by Douglas Jacobs, Esq.

December 20, 2009

I only get to keep one car if I file bankruptcy, right?
Wrong. Often you can keep several cars when you file bankruptcy.  Exactly what you can save and what you can’t keep depends on two factors: the type of bankruptcy you file and the kind of exemptions you can claim.
In a Chapter 13 bankruptcy, you can keep as many cars as appropriate.  That usually means two, but if the vehicles are paid for, or if you can show the trustee a good reason for making payments on the cars, you get to keep them if you want.  Sometimes, the Chapter 13 trustee will wonder if you should be making payments on three or more vehicles when you are not paying all of the debts to your unsecured creditors. Whether you can convince her that it is reasonable for you to do so or not depends on your circumstances.
In  a Chapter 7 bankruptcy, you can keep any property that is exempt.  Exemptions vary from state to state so check with local competent bankruptcy counsel for the answer in your state.
In California, where I practice, there are two types of exemptions.  Under one kind, you can keep as many cars as you want but only up to a value of $2600!  Thus if you have two cars worth $2000 a piece and you don’t owe anything on either of them, the Chapter 7 trustee will want you to turn over one of the cars or buy the non-exempt amount  from the bankruptcy estate.
Under the other kind of exemptions (like the Federal exemptions that are applicable in many states), you can keep one car up to a value of $3300 or as many vehicles as you want by using the “catch all” or “wild card” exemption up to $21,000!”
In any event, the number of vehicles you can keep in a bankruptcy varies, as noted above.  A competent bankruptcy attorney in your state can guide you through your situation to maximize what is kept and minimize the impact of filing.

Wrong. Often you can keep several cars when you file bankruptcy.  Exactly what you can save and what you can’t keep depends on two factors: the type of bankruptcy you file and the kind of exemptions you can claim.

In a Chapter 13 bankruptcy, you can keep as many cars as appropriate.  That usually means two, but if the vehicles are paid for, or if you can show the trustee a good reason for making payments on the cars, you get to keep them if you want.  Sometimes, the Chapter 13 trustee will wonder if you should be making payments on three or more vehicles when you are not paying all of the debts to your unsecured creditors. Whether you can convince her that it is reasonable for you to do so or not depends on your circumstances.

In  a Chapter 7 bankruptcy, you can keep any property that is exempt.  Exemptions vary from state to state so check with local competent bankruptcy counsel for the answer in your state.

In California, where I practice, there are two types of exemptions.  Under one kind, you can keep as many cars as you want but only up to a value of $2550!  Thus if you have two cars worth $2000 a piece and you don’t owe anything on either of them, the Chapter 7 trustee will want you to turn over one of the cars or buy the non-exempt amount  from the bankruptcy estate.

Under the other kind of exemptions (like the Federal exemptions that are applicable in many states), you can keep one car up to a value of $3300 or as many vehicles as you want by using the “catch all” or “wild card” exemption up to $21,825!”

In any event, the number of vehicles you can keep in a bankruptcy varies, as noted above.  A competent bankruptcy attorney in your state can guide you through your situation to maximize what is kept and minimize the impact of filing.

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.

Last modified: October 22, 2012