 TITLE: What Happens to My Car During Bankruptcy? CONTENT: What Happens to Your Car in Chapter 7 Bankruptcy?\n-------------------------------------------------\nFiling for Chapter 7 bankruptcy can clear some unsecured debts, but it may also require selling or giving up some assets to pay debts. The items that are exempt from liquidation, and the value that can be exempted, varies by state.\nIf you file for Chapter 7 bankruptcy and local bankruptcy laws allow you to exempt all of the equity you have in your car, you can keep the vehicle—as long as you're current on your loan payments. And if the market value of a vehicle you own outright is less than the exemption amount, you're in the clear.\nTo determine how much equity you have in the vehicle, subtract your current loan balance from the car's value. Because vehicles tend to depreciate in value fairly quickly, you may not have much equity unless you're nearing the end of your loan term.\nOnce you've determined how much equity you have in your vehicle, take a look at what the motor vehicle exemption is in your state. If you have less equity than the exemption limit, the car is protected. For example, if your state's exemption limit is $4,000 and you have $3,500 in equity in your vehicle, you can keep it.\nIf the equity in your car exceeds the exemption limit, a few different things can happen.\n*   The trustee (the person managing your bankruptcy case) can sell your vehicle, give you the exempted amount, and use the remainder to repay creditors. They may also give you the option to pay off the equity at a discount in order to keep the car.\n*   If you're behind on your vehicle loan payments, the lender can repossess the car. A vehicle is not protected by the exemption if the loan attached to the vehicle is delinquent. But you may be able to keep the car by paying the remainder of the loan in one lump sum, or by reaffirming the loan, which allows you to modify it and get back in good standing.\n*   You also have the option to surrender your vehicle to the lender, which removes your responsibility from the auto loan after bankruptcy. But doing so means you won't have a vehicle, and doing so will have credit consequences similar to repossession. END