Next to your home, your vehicle is likely the possession you are most afraid of losing during bankruptcy. It may be your lifeline, and without it you could have difficulty getting to and from work, as well as any other places you need to go. If you are afraid your vehicle will be sold to satisfy your creditors, it is important to understand the facts before panicking. Depending on your case, you may be able to keep it.

Protecting your vehicle during Chapter 7 bankruptcy

Your ability to protect your vehicle during Chapter 7 bankruptcy will depend on how much equity you have in it. Equity is the difference between your vehicle’s current market value and the remaining balance on your auto loan. Many states’ bankruptcy codes have motor vehicle exemptions, which protect equity up to a certain amount. Neither Mississippi nor Tennessee are among these states. Yet, both offer wildcard exemptions of $10,000 that you can use toward any property of your choosing. If you have this amount of equity – or less – in your vehicle, you can use the wildcard exemption to protect it after filing Chapter 7 bankruptcy, so long as you are current on your auto loan payments.

Protecting your vehicle during Chapter 13 bankruptcy

Protecting your vehicle during Chapter 13 bankruptcy is often easier than protecting it during Chapter 7 bankruptcy. For one, your auto loan will likely be part of your Chapter 13 repayment plan. So long as you stay current on your payments, then, you will be able to keep your vehicle. Furthermore, you may even qualify for an auto loan cramdown. This may happen if you have owned your vehicle for longer than 910 days and if your auto loan’s balance is higher than your vehicle’s current market value. If you have, and if it is, you will pay off the current market value instead.

While some people lose their vehicle during bankruptcy proceedings, you may be among those who can keep theirs. A legal professional can help you understand your options for protecting it.

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