One common reason that people want to avoid bankruptcy is the prospect of losing their possessions. Among those they are most afraid of giving up is their vehicle, since getting to work and other places is difficult without it. If you find yourself needing to file bankruptcy, you likely have this concern as well. But you may be able to keep it your vehicle, depending on how much equity you have in it.
For your vehicle, equity is the difference between the amount you owe on it and its current market value. When filing Chapter 7 bankruptcy, South Carolina courts consider this figure for exemption purposes. If you qualify for the state’s vehicle exemption, you can protect it from your bankruptcy trustee. Otherwise, your trustee would sell it and repay your creditors with the proceeds. So long as you have no more than $6,100 of equity in your vehicle, you can take South Carolina’s vehicle exemption.
Keep in mind that the state also has a $6,100 wildcard exemption. This provision allows you to direct any unused exemptions toward property you want to protect – including your vehicle. With it, you may be able to keep your vehicle if you have up to $12,200 of equity in it.
Cramdowns can help
Your vehicle’s equity is less of a factor if you pursue a Chapter 13 repayment plan, since you will satisfy your auto loan as part of it. But if a court determines your equity is excessive, you may have to forfeit your vehicle during bankruptcy proceedings. You will also lose it if you cannot afford to make the monthly payments on your auto loan. Yet, depending on your circumstances, not only might you get to keep your vehicle, you may qualify for an auto loan cramdown as well. If you have owned your vehicle for longer than 2 ½ years, a cramdown will allow you to pay off its current market value, rather than your loan’s remaining balance.
By understanding your options under each chapter, you may be able to keep your vehicle after filing bankruptcy. An attorney can help you determine the best course for doing so given your situation.