Owning a car is the foundation of financial stability. Unless you live
in one of the few large U.S. cities that has reliable public transportation,
you need your car to keep your job, and paycheck, as most bosses are not
sympathetic if you are consistently late to work because the bus didn't
show up. If you are in debt, and under pressure from your creditors, holding
onto your car is critical to
regaining your financial footing. Therefore, if your car is in danger of falling into the hands of your
creditors, chapter 7 bankruptcy may be the best solution for you.
Once you file for
chapter 7 bankruptcy protection, the court places an automatic stay on all your creditors'
efforts to extract repayment. Instead, control over your estate (lawyer-speak
for everything you own) is given to
a trustee, who is responsible for determining what property you need to rebuild
and what assets can be sold to pay off your creditors. As a general rule,
your creditors cannot force you to pay any debt remaining after the trustee
has liquidated your non-exempt assets.
All states recognize that you need at least a modest car to survive, and
so the trustee may allow you to keep your car, depending on its value.
First, the trustee will figure out how much your car is worth by looking
it up in the
Kelley Blue Book or another source of neutral third party valuation. The second step is
to compare that number to your state's vehicle exemption. So if you
have a 2012 Subaru Impreza that is worth $6,000 and your state's exemption
is $7,500, then your car is protected and the trustee will let you keep
it. If, however, you have a 2016 Mercedes E-class that is worth $23,000,
then the trustee will sell it, give you $7,500 in cash to purchase another
vehicle, and distribute the balance to your creditors.
This is a simplified example. California
has two systems of exemptions, each with different amount for motor vehicles. Choosing the best system
for your individual situation is critical to achieving your goal of escaping
your debts. We at the
Law Offices of James C. Shields are here to help you navigate all the bankruptcy rules in California so
that you can get the fresh start you deserve.