When people reach a financial situation where they have to consider bankruptcy, there can be a lot of fear and uncertainty. What of their assets are they allowed to keep? Will filing for Chapter 7 or Chapter 13 result in a loss of home equity or worse, home ownership? Can a person who files for bankruptcy still own a car or other personal vehicle?
Given the strict limits on assets for Tennessee citizens who file for bankruptcy relief, there’s good reason to be concerned. Thankfully, with the help of a seasoned bankruptcy attorney, those who need to file for bankruptcy relief can protect their most important assets.
What are bankruptcy exemptions?
When an individual files for bankruptcy, certain possessions, within specific legal limits, are exempt from liquidation. Bankruptcy courts may order those who file bankruptcy to sell or liquidate certain assets as a means of raising funds to pay off creditors.
In some ways, bankruptcy courts can be ruthless, requiring the sale of anything from prized horses and gifted jewelry on down to art collections and classic books worth money. However, the courts recognize that certain possessions are necessary for life and livelihood, and those possessions are protected from liquidation by exemptions.
What are bankruptcy exemptions for vehicles in Tennessee?
Many states within the United States set different base values for the maximum protected amount of certain kinds of assets, including personal vehicles. If you own your vehicle outright, the courts will probably allow you to keep it.
Under federal law, up to $3,600 in vehicle equity is protected. If your vehicle is worth more than this, it can still be protected under the Tennessee “wildcard” bankruptcy law, which allows for a $10,000 exemption for any personal property. Vehicles with a higher amount of equity may be subject to partial liquidation, depending on your circumstances.
What if my vehicle is expensive and purchases with financing?
Currently, if it has been at least 910 days since the purchase/financing of the vehicle in question, an experienced attorney may be able to help you reduce what you owe while retaining possession of the vehicle. Called a “cramdown,” this process basically entails the courts adjusting the owed amount on the car to reflect depreciation and its current value. At attorney with bankruptcy experience is your best option for taking advantage of this particular process.
What about vehicle exemptions and Chapter 13 bankruptcy?
Chapter 13 bankruptcy could be considered bankruptcy light. A person facing substantial debt is asking the bankruptcy courts for some forgiveness and court-ordered stays for any pending debt related lawsuits. In turn, people filing for Chapter 13 bankruptcy create and agree to a specific repayment schedule that includes their biggest creditors, such as the lender for a vehicle purchase. Filing Chapter 13 bankruptcy provides an automatic stay on collections, including a pending repossession of your vehicle.
If you’re considering filing for bankruptcy, working with an experienced attorney is the best way to protect your assets and your future.