Can I Keep My Sports Car in Bankruptcy?

April 17, 2024

Can I Keep My Sports Car in Bankruptcy?

Many people fear losing their sports car in bankruptcy.  Sports cars in bankruptcy can usually be kept.  However, the car you are keeping must usually be reasonable and affordable.   It is important to also check your state’s bankruptcy exemptions.

Paid-In-Full Sports Car in Bankruptcy

If your sports car is paid-in-full, you may need to watch the total value of the car.  Classic muscle cars, Mustangs, and even Corvettes are relatively common in bankruptcy.   The key to keeping your paid-in-full sports car in bankruptcy is the value of the car versus your state “exemption.”

As an example, Indiana currently has a $12,100 exemption per person to protect what you own in personal property.  If you are the only person on the sports car’s title, your car value must be lower than this exemption amount to keep it.  You must also deduct some amount for other personal belongings.  Remember, each state’s exemptions are different.  Check your state exemption amount with your attorney.

Still, you can probably keep the sports car even if the value exceeds your exemption amount.   You will simply need to have your attorney negotiate with the bankruptcy trustee.  You will then have to “buy out” the rest of the value by making payments over time to the trustee.

Check Your State’s Current Bankruptcy Exemptions

 

Financed Sports Cars in Bankruptcy

You also can usually keep your financed sports car in bankruptcy.  The key to keeping a financed sports car is two-fold.  First, you must be able to afford the payments.  Second, the overall deal must be fair and reasonable.

First, you must be able to afford your financed sports car in bankruptcy.  Whether filing for Chapter 7 or Chapter 13, you must be able to afford the payments.   If your budget does not allow you to make the payments, you will need to return the automobile to the lender.

Second, the overall deal must be fair and reasonable.  For instance, you may not be able to keep your financed car in bankruptcy if you are treating other creditors unfairly.  This especially applies to Chapter 13 bankruptcy where you repay an amount to your creditors.   For instance, the court will not allow a sports car payment of $1500 per month while you only pay your other creditors $300 per month.  In Chapter 13 cases, the court will require you to pay more to all creditors if you are keeping a luxury item like a sports car.

In Chapter 7, you may be able to keep your sports car even when the deal is unreasonable.   However, you may have problems officially reaffirming on the sports car (getting new loan papers in the bankruptcy).  The court, trustee, and your attorney will attempt to convince you to surrender any sports car that has a bad loan deal.  Still, you can likely keep the sports car even then after bankruptcy.  You can still go against these parties wishes.  Also, you can many times keep the car by paying on it without a reaffirmation agreement.

Keeping What You Own During Bankruptcy

 

Seek Counsel To Keep Your  Car

Always seek bankruptcy counsel to make a plan to keep your sports car through bankruptcy.  Sports cars may not be the best financial choice to keep through a bankruptcy.  Nonetheless, it can be done many times if you make adequate plans to address what will come up during your case.

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