Car Titles and Chapter 7 Bankruptcy
If you are thinking about filing for Chapter 7 bankruptcy in the Tampa Bay area, you probably have questions about how your bankruptcy will affect your personal vehicle. Given that most Tampa residents rely on their vehicles to get to work and to get around the city more generally, the prospect of losing a car through a liquidation bankruptcy can induce anxiety. Generally speaking, we tend to hear two major types of questions surrounding car titles and Chapter 7 bankruptcy. First, can you keep the title to your personal vehicle when you file for Chapter 7 bankruptcy? And second, what happens if you have a car-title loan at the time you decide to file for liquidation bankruptcy?
We will discuss how these questions might impact Tampa residents who file for bankruptcy, but it is always important to speak with a Tampa bankruptcy attorney about your situation. Bankruptcy law is complicated, and there are many nuances in each case.
Understanding Florida’s Motor Vehicle Exemption When You File for Chapter 7 Bankruptcy
Can you keep the title to your personal vehicle when you file for liquidation bankruptcy? To answer this question, you will need to understand a bit more about how bankruptcy exemptions work. In some states, you can use federal bankruptcy exemptions. In Florida, however, you must use state-specific exemptions. Under Section 222.25 of the Florida Statutes, an individual debtor can exempt up to $1,000 in value (or equity) in a personal automobile. Now, whether this exemption will allow you to keep your vehicle depends on a number of different factors, including whether you have a car loan on your vehicle and, if so, whether you are up-to-date on payments, and if you do not have a car loan (and you own the vehicle free and clear), whether it is worth more than $1,000.
If you have a car loan and you are not behind on the payments, if you do not have more than $1,000 of equity in the vehicle, then the bankruptcy trustee will not sell it to repay your creditors. You then may be able to reaffirm the debt with your lender, and continue making regular payments on your vehicle after your bankruptcy discharge. Similarly, if you own the car outright and if the car is not valued at more than $1,000, then the bankruptcy trustee will not be able to sell it (and you will be able to retain the title to this property). What happens, however, if you have more than $1,000 equity in the vehicle (if you are making payments on a loan), or if the vehicle is valued at more than $1,000 (if you own the vehicle outright)? In such a case, the bankruptcy trustee may be able to sell the car in order to recoup anything more than the $1,000.
Other Options and Issues Concerning Cars and Personal Bankruptcy
There are some other options that may be available to you. Most immediately, there is a “wildcard” bankruptcy exemption that allows a debtor to exempt up to an additional $4,000 in personal property if the debtor does not use the “homestead exemption” (for keeping a personal home). You may be able to apply this exemption to your motor vehicle in order to retain the title. A bankruptcy lawyer can also speak with you about the possibility of “redemption,” which involves negotiating a price for the vehicle with the lender and paying it in a lump sum.
Another question we often are asked concerns car-title loans and Chapter 7 bankruptcy. These are loans that debtors take out, signing over their motor vehicle (which has already been paid off and is owned outright by the debtor) as security in order to receive money. In such a case, it is unlikely that there is any equity in the vehicle since you have borrowed a sum of money against it. In such a case, you should be able to retain the vehicle. However, this is not always the case, and situations vary depending upon the amount of the car-title loan and the value of the vehicle.
Contact a Tampa Bankruptcy Lawyer
Issues surrounding car titles and Chapter 7 bankruptcy can be very complicated. It is important to seek advice from an experienced Tampa Bay bankruptcy attorney. One of the advocates at our firm can answer your questions today. Contact Tampa Law Advocates, P.A. for more information about how we can assist you.