Daniel Gershburg

In most instances, you can keep your car when you file for Chapter 7 Bankruptcy, although each state has their own exemption.  In New York, the exemption is $2400 for vehicles if you are filing Bankruptcy by yourself.  That means if you recently purchased a vehicle, and its worth approximately $2500 more than what you still have left to pay on the vehicle, technically the trustee can take the car, sell it, give you yur $2400 and then divy up the rest with your creditors.  That doesn’t happen so often for various reasons.  First and foremost, a car depreciates SIGNIFICANTLY in it’s first year of ownership.  That means that if you bought a new GM vehicle for $30,000 and took out a $30,000 loan on the car, chances are that car will be worth significantly less after its first year, and you”ll owe more on the car that what it is worth, thereby precluding the trustee from selling it.  But lets say you own an older vehicle and you have paid off most of the note, and the car has about $3500 worth of equity in it.  The trustee can technically sell this vehicle, but he/she always has to think of the transactions costs involved.  Just because a Kelly Blue Book valuation says a car is worth $5,000, doesnt mean someone will actually buy it for that price (especically in this market, and especially with SUV’s).  And even if it can be sold for that amount, there are always transaction costs involved in selling a vehicle that substantially decrease any potential profits the trustee can keep.  The moral here is, in many instances you can in fact keep your vehicle even after you file for Chapter 7 Bankruptcy, but be sure to discuss this with your attorney before doing anything.