What happens to your car if you go bankrupt? There are a few scenarios that you have to consider.
1 – You own the car and do not have any secured loan against the title of the vehicle.
If you are the owner of the car and have no loan against it, the value of you car can not exceed $7,900. You can have more than one vehicle as long as the total is less than this threshold.
Also you need to know that the value is not car yard (retail value), but wholesale value. What this means for you is that most people who have a $10,000.00 car will find that for bankruptcy purposes your car is under the limit and you will be able to keep it.
If your car is still valued at more than the threshold and the trustee wants to sell it the trustee has to give you $7,900.00 so you can buy a car.
2 – If you own the car with your partner or somebody else the threshold doubles to $15,800. This is whether or not they are going to declare bankruptcy.
3 – Your car is used as security for a loan.
If your car is leased or is collateral for a loan the value of the car now does not matter as long as you can afford to (and want to) continue your loan repayments and your equity in the car is not more than $7,900.
The one thing that is important is that your car doesn’t becomes an asset if your loan is finalised prior to the completion of your bankruptcy term. So that means that you finish paying off the car during the 3 years of your bankruptcy and it is then valued at more than the $7,900.00 threshold.