Can I Keep My Car If I File Bankruptcy?

bankruptcyI get this question a lot from my clients.  Obviously, for most of us, our cars and trucks are our lifelines.  Without them it would be difficult, if not impossible, to get to and from work, the grocery store, etc.  This is especially true for those of us in the Martinsburg and Charles Town areas of West Virginia where public transportation options are limited and many people commute to other states for work.

There is also a common misconception that the bankruptcy laws only allow a family to keep one car.  Luckily that is a myth because otherwise it would make it very difficult for families to get a fresh start after bankruptcy.

While every case is different, there are some general guidelines regarding vehicles that determine how a bankruptcy can affect the vehicles:
First, if you have a loan that is secured by your vehicle, you must maintain the payments and insurance if you want to keep it.  Actually, this is true whether you file bankruptcy or not.  If you do not make the payments as scheduled, the car loan company will be permitted to repossess the vehicle.

Second, the number of vehicles that you can keep in a bankruptcy depends upon the amount of equity you have in the vehicles or the value of the vehicles.  For a car that you own free and clear of any loans, the equity is equal to the market value.  For a car with a loan against it, the equity would be the market value minus the loan payoff.  In most cases where you have a car loan there is little to no equity in the car.  In that case, the vehicle would be of no value to your creditors and you can keep it as long as you maintain the payments.

Under the bankruptcy laws in West Virginia, you can keep a certain dollar amount of assets.  As long as the total value of your vehicles falls under that dollar amount, you can keep them no matter how many you own.

For more specific information regarding your potential case, call us for a free consultation.