Posted on: 22 March 2019
When you are considering a chapter 7 bankruptcy filing, you might also consider the potential to lose personal property. Having property like a home and vehicle seized by the bankruptcy trustee can make some filers reluctant to take the big step and file. When your financial situation has reached the breaking point, you need to carefully evaluate what could happen to your belongings if you file, so read on to learn more about the potential to lose one very valuable piece of property, your car.
Why is Property Seized?
Chapter 7 bankruptcy is different from all other forms of bankruptcy in that it is, in part, a way to liquidate a consumer's property in an effort to pay creditors. Once you file, your property holdings are examined and any vulnerable pieces of property are identified and valued for potential seizure. The chances of losing your property depend on three factors – your discharged amount, your exemptions, and the value of the property.
1. Your Discharge
Debts that are forgiven are known as discharged debts. That means that you no longer have to pay the debt. In return for having that debt forgiven, you are placing some of your property in jeopardy. Part of the filing package is a list of your assets along with the value. Your assets may be low or they may be high, but if they greatly exceed your debt load that is being discharged, you might have to sacrifice property. If your discharged debts are higher than your assets, you are not as likely to lose property.
2. Your Exemptions
Every state offers exemptions and the amount offered varies. You might have a separate vehicle exemption or it might be included in with the general personal property exemption. An exemption is a given dollar amount that protects your property from the bankruptcy trustee. Here is an example: Your car is valued at $12,000 and your state offers chapter 7 filers a $7,950 dollar exemption. You live in a state that allows married couples to double their exemption for filing jointly. Since your exemption totals $15,900, your vehicle is safe from seizure. Some states also offer what is known as a wildcard exemption that can be applied to a vehicle or other property as you wish.
3. Your Vehicle Value
The final factor involves the worth of your vehicle. Since many people still owe money on their car loans, that must be taken into account. The bankruptcy trustee would have to pay off any existing loan if they seize the car. If you owe more on the car than it is worth, it is not likely to be of interest to the trustee. It must be mentioned, however, that if you owe on your loan, the vehicle could still be repossessed if you are behind on your payments. Speak to a chapter 7 bankruptcy filing service about paying your car loan and a reaffirmation your auto loan.Share