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What Happens to Your Car in Bankruptcy?

If you live in Southern Maryland it is hard to make do without a car. Because of this one of the things we do when you come in for a free initial bankruptcy consult in our Waldorf or Lexington Park offices is figure out what you have to do to keep your car.

If you want to keep something you own in bankruptcy, you have to protect it with what we call an exemption. If you have lived in Maryland for more than two years you would use Maryland’s bankruptcy exemptions to protect your assets.  To figure out what you have to do to keep your car, we have to calculate how much equity you have in it.

To do this we will look at what your car is worth and subtract out what you owe on it. To value your vehicle, we will start with a website like Kelly Blue Book or Edmunds. The value we use is the private party value. If your car is worth less than what you owe on it you can keep it as long as you make the car payments. If it is really far upside down, we may have to talk about if it really makes sense to keep it. But that it is a separate discussion.

If it is worth more than what you owe, or you don’t owe anything on your car, this equity needs to be protected with your bankruptcy exemptions (for more exemptions see our post What are Maryland’s Bankruptcy Exemptions).

Jason Peterson
Jason Peterson
2023-10-17
I have been dealing with tucker and Amanda since November of 2020. They have been helpful, informative, and got me the best resolution for my settlement. It was a long 3 years of back and forth to drs and dealing with everything but it all finally came to an end. Thank you for the help.
Donesha Elliott
Donesha Elliott
2023-10-04
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Rose Rosier
Rose Rosier
2023-07-25
The process was easy and explained every step of the way. Great staff and accomidated my new work schedule. Would recommend if any legal problems.
Katie Montgomery
Katie Montgomery
2023-05-26
One of the best lawyers out there! Didn’t have to go to court for my workers comp claim and he made the entire process easy. While it was stressful to wait he answered all of my questions quickly. Talking to him was very comfortable, like talking to a friend. Never had to wait for a return phone call always got to speak with his para legal, Amanda who is also a very down to earth most caring person! They both went above and beyond and I cannot thank them enough for what they’ve done for me. I will be back for any other services I may need SOMD Law for. Very affordable and professional. I would recommend this office to any friend or person in need of a 5 star lawyer! Thank you to Office of SOMD Law!
Quon Wilson
Quon Wilson
2023-05-18
This firm is excellent! I greatly appreciate the detailed counsel provided to me by Mr. David Gormley who guided me to the best attorney to meet my unique needs. I am very happy with the outcome and I am grateful for Mr. Gormley’s counsel and recommendation.
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darren berry
2023-04-05
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lpcityhotrods
2023-02-25
wow....no other words to say. My attorney, Mr. Clagett was an awesome attorney to work with, he was very patient and very understanding to my concerns and issues. Not only did Mr. Clagett gain my trust as my attorney, but he also gained a good friend. I would highly recommend this firm for any legal issues you may have. THE BEST!!! Thanks for everything - Anthony
Missy Brooks
Missy Brooks
2023-02-23
If you need a bankruptcy attorney, look no further. Mr. Gormley, my attorney and his assistant Dana were not only professional, they also listened and understood my situation. They show empathy and understanding. Mr. Gormley and Dana made the bankruptcy process very easy. And made sure I understood everything every step of the way. They are definitely the best team to hire for all your bankruptcy needs. Thank you so much Mr. Gormley and Dana for everything. My life is so much better thanks to you both. Keep up the amazing work!!!
Whitney Staples
Whitney Staples
2023-01-13
Fantastic office and staff. Extremely kind, patient and professional from the first phone call with the receptionist, to walking in the office and every interaction thereafter. Tucker Clagett answered every question quickly and kept me informed during the entire process. I felt extremely comfortable and a tremendous weight lifted off my shoulders after the initial consultation. If you are in need of a lawyer, I highly recommend Tucker Clagett with Southern Maryland Law.
Shanetta Cole
Shanetta Cole
2022-12-07
I would like to say that Sounthern Maryland Law is the Absolute Best Firm!!!! Everyone there was so kind, caring, understanding, and welcoming. Mr. Tucker Clagett is the attorney, which handled my case. He was attentive, and knowledgeable about my situation. I would definitely recommend anyone in need of council to this Firm. Thank you again Mr. Tucker Clagett for your help!!!!

keeping your car after chapter 7 bankruptcy

Keeping Your Car In Chapter 7 Bankruptcy

Generally speaking you have about $5,000 in exemptions in a Chapter 7 bankruptcy that you can use to protect your equity in your vehicles. This amount may go up or down depending on the other assets you have.

This may go farther than you think. You may be surprised how little your car is worth when you look it up.

Also, if the vehicle is jointly titled, you only have to protect your share. If you are filing a joint case with your spouse, they will have their own set of exemptions to protect the other half.

And you may be able to protect even more equity if you don’t have many other assets to protect. In some cases, a reaffirmation agreement or a redemption option might be viable strategies to consider.

keeping your car after chapter 13 bankruptcy

Keeping Your Car In Chapter 13 Bankruptcy

But sometimes you will have too much equity to protect in a Chapter 7. In this situation you can still protect your car by fling a Chapter 13 payment plan bankruptcy. A Chapter 13 payment plan can also be filed when you are behind on your car payment to stop a repossession and get you caught up on your payments.

In a Chapter 13 bankruptcy you can keep your car even if you have too much equity to protect in a Chapter 7. To do this you will need to make sure that the Chapter 13 payment plan pays back as much money to the unsecured creditors as they would get in a Chapter 7.

In a Chapter 13 case this is called the Chapter 7 liquidation test. This can also be used to protect nonexempt equity in your home and other assets. (for information on keeping your house see our post Can You Keep Your House When You File For Bankruptcy?)

This can all get pretty complicated. But that is why we offer a free bankruptcy consultation. During this consult we can figure out what you have to do to keep your car when you file for bankruptcy.

Conclusion & Next Steps

If you, or someone you know, has this problem you may do them a big favor telling them now is the time to see a bankruptcy lawyer for a consultation. While they may not be able to discharge their tax debt in bankruptcy, they may be able to deal with the debts that are causing their tax problems.

Remember, consultations are free and confidential, so there is nothing to lose.

Want to know more? Discover what you need to know about bankruptcy in Maryland. Click here to see our Free Legal Consumer Guide to Maryland bankruptcy cases and get answers to your questions today. Know your options. Be informed. Protect yourself.

Need a bankruptcy lawyer? Please contact us for a consultation today if you need a Maryland bankruptcy lawyer for your bankruptcy case.

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