Bankruptcy law eases rules on keeping your car after you file

junk-car-donationA very modest increase in the amount of equity in a car that a debtor can keep after filing a bankruptcy case went into effect in April, 2013.

Previously, a single debtor claiming federal exemptions was allowed $3,450 in equity in a vehicle.

With the cost-of-living increase that took effect on April 1st, that was bumped up to a whopping $3,675.

So after bankruptcy, you can keep a car that looks like the one up above right?

Well, yes you could, but that’s not the end of the story.

Debtors with a better car can look to the “wild card” exemptions to save their ride. This provides almost $13,000 in coverage, which should be good for most bankrupt motorists.

Married debtors with both names appearing on the title can combine the car exemptions and get a break of $7,350.

Debtors who use the vehicle for work can add a “tools-of-trade” exemption. Would that work for just a commuter vehicle? Maybe.

And as a last resort, debtors could switch to the state exemptions, which are more generous as far as cars and trucks go. For example, Massachusetts has a $7,500 exemption for a car for state residents who file for bankruptcy, and double that — $15,000 if the bankrupt driver is a senior citizen.

The bottom line: if you have to file for bankruptcy, don’t worry about keeping your car or truck.

 

By Doug Beaton