Will I Lose My Car if I File Chapter 7 Bankruptcy in Florida?
For most people in St. Augustine and Jacksonville, a car is not a luxury. It is how they get to work, take children to school, and reach medical appointments. So it is no surprise that the first question many clients ask about Chapter 7 is whether they will lose their vehicle. The answer in the large majority of cases is no, but the reasons depend on how the car is financed and what it is worth.
Florida’s Motor Vehicle Exemption
Florida allows every filer to protect a set amount of equity in one motor vehicle. Equity is the difference between what the car is worth and what you owe on it. If your car is worth $12,000 and you owe $9,000, your equity is $3,000, which falls within the exemption and the trustee has no interest in the vehicle. If you do not claim the homestead exemption, Florida adds a wildcard exemption that can be applied to any personal property, including additional vehicle equity. Married couples filing jointly can generally double these amounts.
If You Are Still Making Payments
A car loan is a secured debt, meaning the lender holds a lien on the vehicle. Chapter 7 discharges your personal obligation on the loan, but it does not remove the lien. To keep the car, you have three options. You can reaffirm the loan, which means signing a new agreement to keep paying under the original terms. You can redeem the vehicle by paying the lender its current value in a lump sum, which is useful when you owe far more than the car is worth. Or you can surrender it and walk away with no further liability, which is sometimes the right move for a car with a payment you cannot sustain.
If You Are Behind on Payments
Chapter 7 will stop a pending repossession through the automatic stay, but it does not give you a mechanism to catch up on missed payments. If you are behind and want to keep the car, Chapter 13 is usually the better tool. It allows the arrears to be paid over the life of the plan, and for loans that are more than two and a half years old, it can reduce the balance to the car’s actual value.
If Your Car Has Already Been Repossessed
Timing matters. If the lender has repossessed the vehicle but has not yet sold it at auction, a bankruptcy filing can force its return. Once the car is sold, the option is gone. If you have received a notice of repossession or the car was just taken, contact a lawyer immediately.
Two Cars, or a Car Worth More Than the Exemption
A second vehicle or a paid-off car worth significantly more than the exemption is where Chapter 7 gets complicated. The trustee can sell non-exempt property and distribute the proceeds. Sometimes the answer is to negotiate with the trustee to buy back the equity, and sometimes it is to file Chapter 13 instead. This is a planning question, and it should be answered before filing, not after.
Talk to a St. Augustine Bankruptcy Lawyer
Albaugh Law Firm reviews every client’s vehicles, loans, and exemptions before recommending a Chapter. Call 904-471-3434 or visit our St. Augustine bankruptcy lawyer page for a free consultation.
