Protecting Your Car When Filing Bankruptcy
Your car. It provides transportation to work so that you can make money to pay bills. It provides transportation for your kids and families. A common concern individuals have when we first meet is “I don’t want to lose my car.” Another concern is that individuals do not want to include their auto lender in their case. Once you decide to file bankruptcy you have to play by the Court’s rules. All of your creditors are receive notice of your case and are included. However, your auto loan will more than likely not be affected by your case.
Value of Your Car
The main issue with any motor vehicle in a bankruptcy case is it’s value. When you file a bankruptcy case in Ohio you get to use the Ohio exemptions to protect your property. As of April 1, 2016 each debtor in Ohio can protect up to $3,775.00 worth of equity in one motor vehicle. O.R.C. § 2329.66(A)(2) This means that if your car is worth less than $3,775.00 it is free from the claims of any of your creditors (and the Bankruptcy Court). If you and your spouse file bankruptcy and both names appear on the motor vehicle title you can double the exemption to protect up to $7,550.00 worth of equity.
Determining Your Car’s Value
What is a fair way to determine your automobile’s value? Typically, I go to the National Automobile Dealers Association’s website to determine it’s value. Here you simply insert the make, model, year, and mileage of the vehicle to see the value listed. Another website that is regularly used is Kelley Blue Book. Both websites are commonly used and their values accepted. Another option is to take your car to an independent automobile appraiser. You might consider this step if you feel that the value from the websites is just too high.
Treatment of Your Car’s Value in Bankruptcy
The Trustee’s job in your bankruptcy case is to collect non-exempt property, liquidate it, and use the proceeds to pay back some of your debt. If you have a motor vehicle valued at $3,000.00 then you can protect it. The Trustee would not be able to take the car, sell it, give you back $3,775 and have proceeds left over for the benefit of your creditors.
If you have a automobile loan more than likely you will have no equity. The majority of the time the car will be worth less than the remaining balance on the loan. In this situation the Trustee would not have an interest in your motor vehicle either. If the Trustee sold the vehicle they would not have enough money to even pay off the car loan.
However, if your vehicle is worth $10,000 and there is no loan against it, that may pose a problem. Here, the Trustee could sell the car, give you the $3,775 and use the remaining proceeds to pay off some of your debt.
Keep in mind that you also have a wildcard exemption worth $1,250 that you can use in addition to the automobile exemption to protect a total value of $5,025 in your car. O.R.C. § 2329.66(A)(18)