In Chapter 7, Can I Keep My Car?

by Dana Wilkinson, Attorney at Law

March 19, 2007

If I file Chapter 7 bankruptcy, I can’t lose my car, can I?

I hear that question from clients all the time, in one form or another. Many people assume that if they have only one car, that car can’t be taken to pay their debts. After all, in most parts of this country, you have to have a car in order to get to work, and many jobs require the actual car! You need transportation for work, for medical care, to take care of your family. How can a bankruptcy trustee take your car if it is necessary for you to work or care of your family? Unfortunately, in many states, you can lose that car.

When you file a Chapter 7 bankruptcy, which is a liquidation, the property you can keep will be determined largely by two factors: 1)exemptions, laws that specify the type and value of property that is “exempt”

Can I keep my car?

Can I keep my car?

from seizure by creditors or a bankruptcy trustee; and 2) the equity, or value in excess of liens and exemptions, that you have in your property. Exemption schemes vary from state to state, and can even depend on how long you have been resident in a given location. For example, South Carolina currently exempts only the first $1,200 in equity in a vehicle. If you own a 2005 Honda Accord with no liens and a wholesale value of $5,200, a Chapter 7 trustee in a South Carolina case probably couldn’t sell your car, because you’d be entitled to claim $5,650 in equity in that car exempt.  In another state with lower exemptions, the Chapter 7 trustee might be able to sell your car, pay you the exempt amount, and keep the rest to pay your creditors.

An experienced bankruptcy lawyer can advise you of the effect bankruptcy will have, and whether you will be able to keep your car (or any other property). Check it out with a bankruptcy lawyer. You may find that, under the exemption laws applicable to your case, your vehicle is protected. Or, your bankruptcy lawyer may be able to offer other options to resolve your financial crisis AND protect the property you need in order to survive.

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Däna (pronounced "Donna") Wilkinson, has been a bankruptcy lawyer in South Carolina for 20 years. She is certified as a bankruptcy specialist by the South Carolina Supreme Court.

Last modified: May 22, 2013