One of the most frequent concerns I hear when someone reaches out to me with questions about bankruptcy is whether or not they will be able to protect their vehicle. Obviously, being able to keep your vehicle is an important issue when you’re considering whether or not to file. Without a vehicle you cannot get to work, pick up your children from school, or even run basic errands.
The good news is that the exemptions in bankruptcy law generally allow you to keep your vehicle when filing. Under the federal exemptions, which can be used in Pennsylvania, $4000 in equity can be protected for your vehicle. “Equity” in the vehicle basically means the Kelley Blue Book value minus the remaining balance of what you owe. If, like most people, you have a monthly payment on a relatively new vehicle, you should not have much equity in your vehicle. That being said, the used car shortage during the past several months of COVID has led to Kelley Blue Book values increasing much more than normal.
If you own your vehicle outright, there could be an issue as to whether or not there is more than $4000 in equity. The good news is that you may also use the “wildcard exemption” which could add up to another $13,900 to protect your vehicle. It will be important to discuss this with your bankruptcy attorney to make sure there will not be an issue.
A couple other notes. The exemption for cars doubles if you are filing jointly with a spouse. If you have motorcycles, boats, RVs, or ATVs, they will need to be exempted separately. Regardless, in the vast majority of cases individuals are able to protect their vehicles in Chapter 7 bankruptcy. Call me at 412-414-9366 if you have any questions or want to set up a free consultation..