Filing for Bankruptcy? Don’t Forget the Cadillac

Apr 6, 2015 | Chapter 7 Bankruptcy

When you file for Chapter 7 bankruptcy, you don’t get to pick and choose which debts you eliminate or what assets you list on your paperwork. Bankruptcy is an all or nothing legal action.

When in Doubt, Disclose, Disclose, Disclose

“But I don’t want to lose my Ford F250. How am I going to get to work every day?”

Unfortunately, if you want to file for bankruptcy, you have to tell the court about absolutely everything. This includes every creditor, every source of income, and every single asset that you own, including every car in your name.

Even if you own a vehicle that your daughter drives when she is away at college – a vehicle you have never even seen before – you have to tell the court about it. As long as it’s in your name, it’s your asset and must be included.

Don’t Go Tradin’

“I’ll just transfer the Geo Metro’s title into my daughter’s name. That way nobody will ever know it was mine!”

This is a dangerous mistake that many people make before filing for bankruptcy. You can’t just transfer property to somebody else before filing. These transfers have to be reported when you file for bankruptcy. You may lose the vehicle if and when the court finds out. And if you don’t disclose the transferred asset to the court when you file, you could face fines and jail time when the court figures out that you transferred an asset before filing.

Exempt but not Forgotten

Fortunately, Chapter 7 bankruptcy provides exemptions that help you protect a car when you file. How much vehicle value you can protect depends on the state where you file, but all states do allow you to protect one vehicle as a singe person, and two vehicles as a married couple.

If your vehicle has too much equity (the amount the vehicle is worth, minus any loans) you may not be able to keep it when you file. If you own a car with no equity (more is owed on it than it is worth), you will be able to keep it even if you have already used up your exemption on a different car. If it has no equity, it has no value to the court, so you will not lose it when you file.

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You can contact an experienced bankruptcy attorney at Meyer Law for a free consultation.

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