Can I Keep The Car?
Can I keep the car that I’m paying for if I file a chapter 7 bankruptcy case?
Yes, if your bankruptcy schedules properly exempt any net equity value in your car and you keep making timely payments during and throughout the course of the case.
In individual bankruptcy cases, California exemptions under California Code of Civil Procedure §703.140(b)(2) (the “703 Series”) protect net equity value of $4,800.00 in one automobile or, under CCP §704.010 (the “704 Series”), net equity value of $2,725.00 in one or more automobiles. In addition, if you claim exemptions under the 703 Series, you may also apply an additional ”wild card” exemption in the amount of up to $25,340 against excess equity in your car or any other asset, like cash, that isn’t specifically covered by an exemption.
Thus, using the 703 Series, $4,800 may be applied to one vehicle and the wild card amount of $25,340 may be applied to equity in excess of $4,800.00 in that vehicle or to equity value in additional vehicles or other assets for total net value of $30,140.00.
Don’t Mix & Match
Keep in mind that you cannot “mix and match” the two exemption statutes. If you select one, it must be exclusively applied to all claimed exemptions. Typically, if you have nonexempt equity in your home, you’ll use the 704 Series making the “wild card” exemption unavailable to you. If you don’t have home equity to protect, the 703 Series is commonly preferred.
If, when you file, you are required to make car payments to a lender that holds a valid lien or security interest in the vehicle, you must continue making payment during the case or the lender can apply for, and usually obtain, relief from the automatic stay under 11 U.S.C. §362 to repossess the vehicle for nonpayment (breach of the purchase agreement). This principal, of course applies to any asset, like your home, on which payments are due on the filing date. These “secured” claims are fundamentally different from unsecured claims, like credit card charges, that are subject to your discharge.
Of course, if your vehicle payments are unduly burdensome, you could stop making them, file chapter 7, and any balance owed to the lender should be discharged. Relief from the automatic stay will typically be granted to the lender upon the filing of a motion and, after entry of an order, repossession can quickly follow.
About Hurlbett & Olmstead
Since 1994, we’ve helped thousands of people in Santa Barbara, Ventura, Paso Robles, Santa Maria and San Luis Obispo regain financial peace in their lives. These people now experience a life free from the stress and worry that comes from watching unpaid bills mount, answering calls from arrogant debt collectors, receiving a lawsuit from a process server, finding an empty spot where a car has been repossessed, missing money from a garnished paycheck, or knowing that their house will soon be sold at foreclosure.
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