Hammond & Hammond, P.C.

Consumer Bankruptcy

Will Bankruptcy Cost Me My Car?

In addition to their home, a lot of people consider their vehicle to be one of the most important assets they own. For many, their car or truck is their only means of transportation, allowing them to easily get to work and maintain employment.

But when mounting debt becomes a burden and filing bankruptcy is the best relief option, many fear their vehicle will be one of the first things to go in order to pay off creditors. But is this always the case? Will bankruptcy always cost you your car?

The answer is no, not always.

In some cases, individuals are able to claim the motor vehicle exemption, explained in 11 U.S.C. ยง522, if the vehicle's equity is under a specific amount. Georgia law sets the exemption amount higher than the federal level, allowing an exemption if the equity in the vehicle is less than $5,000.

It's very important to know that just because your vehicle is under the state exemption amount, this does not automatically mean your vehicle is safe from creditors. If you are behind on payments or have stopped making payments altogether, a creditor may still push for repossession.

If your desire is to keep your vehicle while filing bankruptcy, staying current on payments can help as well as qualifying for the motor vehicle exemption. You can also consider making arrangements with your lender, such as renegotiating the terms of your loan. Filing bankruptcy can also put a stay on collections, which may buy you time to make arrangements as well.

The Type Of Bankruptcy Plays A Role

It's important to point out that the motor vehicle exemption works differently in each type of consumer bankruptcy. In Chapter 7, the exemption may allow you to keep your vehicle, provided you meet all the necessary requirements. In Chapter 13, the exemption can lower the amount of money you will have to pay back per your repayment plan.

Talking To An Attorney

Though it may seem simple and straightforward, the motor vehicle exemption does not apply in all situations. Talking to a lawyer about your specific circumstances will help you understand this part of the bankruptcy code better and help you determine whether it will be a benefit when you file bankruptcy.

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