Can I Claim more than One Car Exempt?

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Question:

My wife and I rely on both of our car for work, and want to keep both of them. If we file for chapter 7, will we be able to claim both of them exempt?

Answer: (1)

First, it really depends on the value of the cars, and whether it would be worth it for the bankruptcy trustee to sell them. If you owe more on the cars than what they are worth, then there is no equity that the trustee could raise by selling them.

If you do have positive equity, then you will need to use the automobile exemption to cover the equity. Any deficiency still remaining will need to be considered by reaffirming or redeeming the debt.

If you elect to reaffirm the debt, you will be responsible for maintaining payments on the property in much the same way as if you had never filed for bankruptcy.

If you choose to redeem the debt, you will need to give the creditor(s) holding liens against the automobile(s) the equivalent lump sum of cash in return for keeping the car.

One great thing afforded by bankruptcy is the ability to cram down the principle of a financed car. When you file your bankruptcy schedules, you will list both the market value and principle balance of any property. If the market value is less than the amount owed, the difference is said to be "unsecured" and can sometimes be eliminated along with other unsecured debts such as credit cards. This will make the monthly payments easier to maintain.

Talk to a Bankruptcy Lawyer to find out how to keep your property while getting rid of all your unsecured debts. You would be surprised that you can usually keep all of your property.

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