Because of misconceptions about bankruptcy, some people sell their vehicle before or during bankruptcy. Many people think that they will lose their car no matter what when they file bankruptcy. The truth is that you can often keep your car in chapter 7 or chapter 13 bankruptcy, depending on how much equity you have in the car.
Selling your car either before or during bankruptcy can often be considered bankruptcy fraud, and your trustee could get the vehicle back so that it can be liquidated and the proceeds distributed among your creditors. You could also face up to 5 years in prison and/or pay $250,000 in fines. Whether or not it could be considered fraud is determined by a number of factors.
How Selling Your Vehicle Impacts Your Bankruptcy
Since each state is different, we can't tell you for sure how selling your vehicle will impact your bankruptcy. Each state has different rules on how much vehicle equity you're allowed to keep. Some will allow you to exempt the maximum federal amount, which is $3,450, while others will allow a different amount.
If the equity that you had in your car was significantly more than the exempt amount, the trustee would probably sell it to pay your unsecured creditors. Selling it before filing bankruptcy might be tempting, but could land you in hot water. The court can look at several things when determining fraud, including:
- If you received fair value for the property
- When you sold the property
- Who you sold the property to
- What you did with the proceeds
- Why you sold the property
The bottom line is that if you are considering or in the process of filing bankruptcy, you should always consult your attorney before selling anything. You should also be truthful with your trustee about any property you have sold.
Obtaining Bankruptcy Auto Financing
In the event that your vehicle was liquidated, you may need to obtain bankruptcy auto financing to buy a new car. Here at BankruptcyAutoFinancing.com, we have a large network of lenders who can work with you whether you filed Chapter 7 or Chapter 13 bankruptcy. To get started, simply fill out our online application whenever it's convenient for you.
One of our experienced bankruptcy loan specialists will go over your application and contact you with your approval information. Then you can visit a local dealership to pick out a car, truck or SUV that fits your budget. You'll be back on the road to financial success in a new-to-you vehicle.
Remember we are not lawyers and cannot give legal advice. The situations discussed are only our experiences over the years and may vary with each customer.