Filing for Chapter 7 bankruptcy can offer a fresh start, but you may be wondering what happens to your car during the process. In Indiana, the answer depends on several factors.
Car exemption in Indiana
In Indiana, state law allows you to keep your car if its value falls within the exemption limits. The exemption is a legal protection that lets you keep certain property, including your car, during bankruptcy. For an individual filer, Indiana provides an exemption of up to $19,300 for personal property, which may cover your vehicle, depending on its value.
If your car is worth less than the exemption amount and you don’t have significant equity, you may be able to keep it. This is one of the advantages of filing for Chapter 7 bankruptcy – it can help you retain assets that are necessary for daily life, like a car.
What if your car is worth more?
If your car’s value exceeds the exemption limit, it may be sold by the bankruptcy trustee to pay off creditors. However, if you want to keep the car, you can work out a deal with the trustee. You might be able to buy the car back for its market value minus the exemption amount. Alternatively, you could explore options like reaffirmation, where you continue making payments on the car loan to retain ownership.
Impact on car loans
If you have an outstanding loan on the car, Chapter 7 bankruptcy doesn’t automatically wipe out that debt. You’ll still need to deal with the car loan, but you have options. If you want to keep the car, you can reaffirm the loan, or you might work out an agreement with your lender to maintain the vehicle. If keeping the car is not a priority, you could surrender it and have the loan discharged.
Having a car is essential for many people. As you consider filing for bankruptcy, remember that keeping your car is often possible, it just depends on how much equity you have and how you handle the situation.
