A Chapter 7 bankruptcy may not require you to give up your vehicle, even while paying off a car loan. As noted by Experian.com, you may continue financing your vehicle if its equity does not exceed Tennessee’s wildcard exemption.
Tennessee generally allows Chapter 7 filers to hang on to some personal property. By using the wildcard exemption, you may, for example, keep a car or cash in your bank account. When the combined value of the assets you wish to keep totals less than $10,000, you may exempt them from your bankruptcy.
Valuing a car with an outstanding loan
If you expect to continue making payments on a car loan, you may calculate its value based on how much you still owe. As noted by Bankrate.com, you may determine your vehicle’s worth by subtracting your loan’s balance from the fair market value of your car.
You may also need to include depreciation in your calculation. If your car’s value minus the loan is worth no more than $10,000, you may exempt it with your petition.
Repossessing a vehicle with a loan in arrears
Many individuals considering Chapter 7 bankruptcy have fallen behind on car payments. A lender then has a right to repossess your vehicle and you may not claim it under an exemption.
If you believe you could discuss a new payment arrangement with your lender, reaffirming your agreement may allow you to keep your car. You may need to make a lump-sum payment or sign a new note and include a copy with your petition.
When you own your car free and clear, you may keep it as long as its value does not exceed Tennessee’s wildcard exemption limit. With an outstanding car loan, however, you may need to work out a new payment agreement with your lender during the bankruptcy process.