The value of your car is an important consideration when filing bankruptcy. This is because your car, like the rest of your property, must be exempted from your creditors.
Exemptions are available under state and federal law. These exemptions exempt, or protect, your personal property and real estate from being liquidated to pay your creditors. Most exemptions are sufficient to protect the property of most people.
This is also true of vehicles. The exemption must only protect your equity in the vehicle. Equity is the value of the vehicle minus what you owe. Most people owe nearly as much, or more, as the vehicle is worth. Normally, as you paid on the vehicle, the value dropped as well.
However, the shortage in car production the past two years has led to a strange situation where car values have gone up, even as the cars have gotten older. Shortages in car production have led to shortages in used cars. So, in some situations there have been problems with filing bankruptcy when individuals have some equity in their cars.
The motor vehicle exemption is $4,000.00 per debtor. The wildcard exemption can be used as well to top-up the amount. For most debtors, this issue with exemptions will only be a problem if they have paid down the car a fairly significant amount since purchasing it . This may be an issue you need to touch on with your bankruptcy attorney. Getting an accurate vehicle value will be important in ensuring that you get to keep it after filing your bankruptcy.
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