Whether or not you can keep your car after filing bankruptcy depends on which type you file and if your vehicle’s value falls under the eligible exemption limit. Since New York allows you to choose from either state or federal bankruptcy exemptions, keeping your car might be an option.
Individual Bankruptcy Options
When you file bankruptcy as an individual in New York City, if you pass the means test, you typically have the option to file either a Chapter 7 or Chapter 13 bankruptcy. Though both have their similarities, they’re very different processes.
In a Chapter 7 bankruptcy, a court-appointed bankruptcy trustee sells off – or liquidates – any non-exempt property in order to repay your debts. This process typically only takes four to six months.
In a Chapter 13 bankruptcy, on the other hand, a trustee sets up a repayment plan that you must follow. It lasts either three or five years, and allows filers to pay off the majority of their debts with monthly installments.
Both types of bankruptcies help reduce the stress of creditors constantly calling you by placing you under an automatic stay. This means that creditors must stop collection actions for a set period of time.
Another similarity between both types of bankruptcy is that any remaining unpaid debt is wiped away after the successful completion and discharge of it.
Bankruptcy Exemptions in New York
Whether you file a Chapter 7 or Chapter 13 bankruptcy, the amount of personal property you’re able to keep comes down to exemptions. Each state has its own set of bankruptcy exemption limits, but there’s also a federal exemption system in place in the U.S. Because of this, some states allow you to choose which set of exemptions works best for you. New York is one such state.
This means you can use either the state or federal exemption limits, but you can’t pick individual exemption amounts from each list. Exemptions are designed so that you can keep the personal property that’s necessary for your daily life – like your primary residence, a vehicle, and household items up to a certain value.
According to the legal website Nolo.com, you’re allowed to exempt up to $4,550 in car value under New York State exemptions, or $11,375 for a vehicle that’s equipped for disabled individuals. In some cases, you may also be able to add up to $1,150 in additional value to that with the New York wildcard exemption.
If you choose to use federal bankruptcy exemptions, you’re allowed up to $4,000 for a car, plus $1,325 from the federal wildcard exemption. Under federal guidelines, you may also be able to add up to $12,575 in exemptions for any property, including a vehicle, if there is any unused portion of your homestead exemption.
Since there are many available exemptions in New York, and exemption amounts change every three years, be sure to work closely with your trustee to ensure you’re filing the correct exemptions and amounts for your bankruptcy.
Keeping Your Car during Bankruptcy
Being able to keep your car during a bankruptcy depends on whether or not the value of your vehicle meets the exemption you choose. In a Chapter 7, if the value of your car exceeds your exemption limit, it can be sold by your trustee to help repay your debts.
However, in a Chapter 13 bankruptcy, you’re able to keep non-exempt property, including your vehicle. Any value over and above your exemption amount is included in your repayment plan.
Keep in mind that bankruptcy exemptions aren’t automatic. If you want to keep any of your property, such as your car, you have to file the exemption paperwork – and do it carefully. Mistakes on exemption documents could cause you to lose your property, or have to pay for it, depending on whether you file a Chapter 7 or Chapter 13.
Getting a Bankruptcy Auto Loan in New York
If your vehicle was lost during a bankruptcy, you may be struggling to find a way to finance another one. At Auto Credit Express, we want to help you find the right fit for your bankruptcy auto loan needs.
Whether you’re just coming out of a Chapter 7 bankruptcy, or you’re in the middle of a Chapter 13, let us get you connected to a local dealership that has lending options for bankrupts. We work with a nationwide network of special finance dealers, including many in New York.
When you’re ready to find the right place to start the journey to your next car, fill out our free and easy auto loan request form. There’s never any obligation to buy, and we’ll get right to work matching you with a dealership near you.