Chapter 7 bankruptcy can help you discharge unsecured debts like credit cards and medical bills. This process can sometimes lead to the liquidation of your personal property, including valuable assets like your vehicle.
By carefully planning ahead, it is possible to protect your car during bankruptcy.
Review Indiana’s regulations
Every state in the country has its own set of exemption laws. In Indiana, there are no vehicle-specific exemptions. However, it is possible to use exemptions to protect equity in vehicles like cars and trucks during Chapter 7.
For instance, you can use a wildcard exemption for any tangible personal property valued at up to $12,100. These exemptions allow individuals to guard nonresidential property from creditor seizure.
Assess your car’s equity
Before filing for Chapter 7 bankruptcy, you need to assess the equity in your car. To do this, determine your car’s fair market value. Take into account factors such as its age, condition and mileage. You can use reputable sources like Kelley Blue Book or consult a professional appraiser for an accurate valuation.
Next, quantify your outstanding car loan balance. Your equity in the vehicle is the difference between its fair market value and the amount you owe on the loan. If your car is worth more than what you owe on the loan, it has equity.
Examine exemption limits
If your car’s equity falls within the exemption limit, you can typically keep your vehicle during Chapter 7 bankruptcy. Creditors cannot force its sale to satisfy your debts. However, if your car’s equity exceeds the exemption limit, you may need to explore other options, such as negotiating with the trustee. You can also make a reaffirmation agreement with your lender to keep the vehicle by reaffirming the loan under the existing terms.
When declaring Chapter 7 bankruptcy in Indiana, there are multiple ways you can guard your personal property, including your car, from liquidation.