Keeping a car during bankruptcy is possible. Keeping two cars is also possible but harder than keeping one motor vehicle. Here are three factors that play a part in determining whether you can keep both vehicles:
The Amount of Equity on Your Car
Normally, motor vehicle exemption protects a certain amount of car equity from your trustee's hands. Your car's equity is the difference between its worth and what you still owe on it. For example, if your car is worth $7,000, and you still owe $5,000 on it, then its equity is $2,000. This figure is important because it determines how much money you need to pay into your Chapter 13 so that you get to keep both cars.
When you file for bankruptcy, your estate property (any property that isn't exempt) goes into paying attorney fees, settling debts, and other related costs. To keep your cars, you need to put an amount equivalent to their equity into the estate property pot. The higher the equity is, the more difficult this will be to do.
Distribution of the Equity
It is not just the amount of the equity that matters; even the manner of the distribution is important. It is easier to keep both cars if one is paid for than if you are still servicing both payments. Paying for two cars is difficult, and the trustee may feel that this will strain your finances and interfere with your commitment to the bankruptcy plan.
Your Need For The Cars
It's not just a question of whether you can pay for the cars; it also matters whether you really need them. Anybody who is filing for bankruptcy has already admitted to a financial problem, so any unnecessary financial obligation must be nipped in the bud.
For example, if you own two cars, then you need to prove that having only one car is detrimental to your success. For example, if you use one car to commute to work, and your spouse uses the other one for a side business, then you may be able to keep both. However, it will be difficult to hold onto both of them if you use one for work and reserve the other one for recreational use over the weekends. Most trustees will tell you that you don't need the latter.
It's difficult to keep both cars, but it isn't impossible. Early planning in collaboration with your bankruptcy attorney is necessary to boost your chances of success. Don't forget to be brutally honest with the lawyer to help him or her help you best. For more information, speak directly with professionals like the Reppe Law Office.